For decades, globalisation meant moving manufacturing offshore. Companies kept costs lower and maintained competiveness by sending contracts to manufacturers in Asia and Eastern Europe. But a new trend in manufacturing has seen businesses bring those contracts back to their home countries. This is called reshoring, and it has big implications for any business that sells products.
A survey by the Manufacturing Advisory Service found that in the past year about one in six UK manufacturing companies either has reshored their manufacturing or is in the process of doing it. Comparatively, only 4% of respondents had offshored their manufacturing. Respondents’ main reasons for reshoring were costs, quality and turnaround or lead times.
While each of these concerns can mean different things to different businesses, there are some overall trends that these concerns highlight, and there are some tips you can take away from these trends.
The cost is rising
Labour rates in Asia and Eastern Europe are rising, so the savings made by moving operations to another country are diminishing. Moreover, shipping costs are rising as energy costs soar, so transporting your goods has become more and more expensive.
In many cases, manufacturing in Britain, closer to your market, can make more financial sense. Yes, labour costs are higher, but not by that much anymore. Transport costs will be cut, and that can be enough to make up the difference.
Consumers expect better quality
Consumers are becoming more discerning. They need to make their money stretch further, so when they need to purchase something new, they want to know that the product will last. Quality has become a crucial element in the decision to purchase.
By moving operations back to the UK, you can count on certain things. You know that the workforce will have a certain amount of training and education. You know that the manufacturing firms will have quality machines, maintained according to stringent standards. You know that you can pop over to the factory to oversee production at any time, so you know they will maintain the quality you and your customers demand.
Customers don’t want to wait
For businesses to respond quickly to the challenges and opportunities of markets, they need to have as short a supply chain as possible. They need to move manufacturing operations closer to the markets they serve.
Quick turnaround times are especially important in design-led sectors like fashion, textiles and our sector, interior design. That is why we have brought a proportion of our manufacturing contracts back to the Midlands from China. By manufacturing items nearer our market, we’ve been able to reduce the time from a product’s design to its production. What had taken six months can now take just six weeks.
This shorter turnaround has been crucial to our success. Our customers order customised bathrooms, and they want their bathrooms in days, not months. Reducing the turnaround time for products enabled us to serve more customers, more quickly and more efficiently.
Reshoring can lead to more sales
Reshoring means more than just convenience and shorter lead times. It also means improving your bottom line. The survey found that 68% of firms that have reshored have seen an increase in sales, compared to 58% of all respondents. Simply put, businesses with shorter lead times have more sales.
The reasons to reshore are increasingly clear. It will help you serve more customers more quickly, which will lead to more sales. Your business will be more able to respond quickly to market forces, without compromising on quality. It seems then that globalisation has come full circle: now, to provide the best product for the best price, you probably should come back home.
Ian Monk is CEO and founder of Bathrooms.com
