RESHORING IN PRACTICE: WHAT IS RESHORING AND HOW DOES IT WORK?

RESHORING IN PRACTICE: WHAT IS RESHORING AND HOW DOES IT WORK?

“In the 1970s, companies started offshoring, moving production and services to countries like China and India because of lower wages. Multifix produces in China for years, but in recent years we have seen an increasing need among customers for reshoring, with production coming back”.

Edwin van Diessen is Purchasing Manager at Multifix, he sees an increasing demand for reshoring. Customers want the production to take place in the Netherlands again, or at least closer to it: “An intermediate form is nearshoring, in which production does not return to the original country, but to a country closer by with lower wages, such as Turkey or the countries in Eastern Europe. Then you gain a speed advantage, but often at a lower cost than would be the case with reshoring”.

WHICH COMPANIES WANT RESHORING? AND WHY?

“Reshoring is, of course, mainly done by industry and ICT. Most offshoring took place in these sectors because of the relatively high wage component in the costs. Over the years, the most popular offshore countries have also changed, as costs and standards of living in those countries have also risen. The gap is already somewhat smaller”.

“The main argument for reshoring is the rising wage costs in low-wage countries, but also because of political tensions between, for example, China and the US. In recent times, sustainability has also played a role. All that transport is, of course, less good for the environment.”

“In addition, lead times and quality risks are playing an increasing role in purchasers’ decisions. Many governments also gave companies subsidies for reshoring or introduced special import taxes, which made products from China and India more expensive”.

HOW DOES RESHORING WORK IN PRACTICE?

“Suppose a Dutch manufacturer of car seats moved production to China years ago because of lower wages. The company is ‘reshoring’ when it takes production back to the Netherlands”.

“Multifix is often the bridge between offshoring and reshoring. If we help customers with their reshoring issues, we are able to shorten their time-to-market. We close the supply gap with stocks and high quality standards. Products that can still be made well and cheaply in a low-wage country often stay being produced there. As soon as things get a bit complicated you think of reshoring or nearshoring. Multifix took the production of cable trees to Eastern Europe, for example”.

WHEN DO CUSTOMERS ASK FOR RESHORING?

“Customers often ask for reshoring when they need a boost in their production. This extra production is then deliberately outsourced nearby because of the desired speed. For example the production of a sheet metal part of which the bulk is produced in China and a part is now also produced in the Netherlands because of the speed. Multifix then guarantees the quality; after all, we know the producers in the Netherlands and carry out inspections at the same points as China. In this way we guarantee that the customer does not notice a difference”.

“If we take over a customer’s supply chain, we outsource parts to China and parts in Eastern Europe. We have the flexibility to house production worldwide, which allows us to switch quickly in the event of problems, it actually eliminates the need for reshoring. It’s all about giving the customer a healthy night’s sleep, and with our experience we can offer that very well”.

Click here for more information about our offshoring and reshoring capabilities.