Posted August 17, 2021

What Are The Cost Advantages of Reshoring My Part Production?

Customers prefer products made in the USA, one of the cost advantages of reshoring manufacturing operations

For decades, manufacturing companies have tried to cut costs by offshoring to countries with cheap labor. However, the perceived financial benefits of offshoring have come into question in recent years, and a growing number of American companies have realized the cost advantages of reshoring operations back to the U.S. This article looks at some of the hidden operational costs of offshoring, how offshore suppliers impact the cost of quality—and how reshoring with a domestic manufacturing partner can make an operation leaner and more cost-efficient.

Hidden Operational Costs of Offshore Supply Chains

There was a time when it was possible to save money by offshoring production, but global manufacturing industry trends are changing. The costs of labor, energy, transportation, and materials overseas have skyrocketed in recent years. Rising costs have canceled out much of the savings manufacturers used to find offshore.

When evaluating suppliers, manufacturers should look at the total cost of production, including transport, inventory, duties, and quality—not just labor. Partnering with a domestic vendor for outsourced production allows companies to avoid the extra operational costs of offshore supply chains.

Let’s look at a few examples of the costs of offshoring:

  • High International Shipping Costs. Shipping over long distances doesn’t just raise costs; it creates longer lead times. The more distant the supplier, the more necessary transfers and opportunities for delays. When products or materials must move between countries, border inspections can slow delivery even more.
  • Inventory and Capacity Management. The risk of long, unpredictable lead times results in less efficient production capacity planning and inventory management. Companies using offshore suppliers often need to keep safety stock at offshore distribution centers. Because they rely on a supply chain that can take a long time to respond to changes, they have less agility to react to changes in demand. They often have to plan production far in advance, increasing the risk of overproduction and excess inventory.
  • Increasing Tariffs. In the past, low import tariffs supported the cost savings of offshoring. However, recent tariff increases have diminished these advantages. In particular, steel and aluminum tariffs have increased production costs for U.S. manufacturers and changed the way they do business.
  • Export Control Laws. For manufacturers of defense and aerospace parts, working with offshore suppliers means following ITAR (International Traffic in Arms Regulations) and EAR (Export Administration Regulations) requirements. These include export licensing, registration fees, documentation retention, and reporting. Additional requirements include ITAR data security for email and phone communications with non-U.S. individuals and businesses—technical information like engineering drawings and specifications have strict digital security and marking requirements. Manufacturers subject to ITAR or EAR often need to employ a full-time legal professional just to ensure compliance.

The COVID-19 pandemic has made the risks and hidden costs of offshore supply chains more apparent than ever. The pandemic disrupted global logistics in 2020 as countries closed their borders, workforces dwindled, and ships sat idle in ports. These global developments have had devastating impacts on production schedules and order fulfillment.

COVID-19 is just one undeniable example of how offshore supply chains can hurt manufacturers financially, but the cost advantages of reshoring go beyond the pandemic. Reshoring strengthens the U.S. economy by helping to balance trade deficits, creating stable, well-paying jobs, and fostering a skilled domestic workforce—all while reducing operational costs.

The Cost of Quality

Quality comprises the most frequently cited reason for reshoring manufacturing to the United States. Despite this, companies often overlook quality when sourcing production. Too often, they trade quality for perceived cost savings—even when the resulting quality issues ultimately raise costs. Additionally, defective parts, low-quality materials, recalls, and the resulting production delays add unplanned costs to offshore supply chains.

Reshoring manufacturing to the United States significantly improves consumer perception of a product’s quality. According to a study by Consumer Reports, almost 70 percent of American consumers say they prefer U.S.-made products to imported ones. Over 80 percent are willing to pay up to 20 percent more for them.

Consumers know U.S. manufacturers have access to the highest quality materials and follow strict industry standards. Plus, new production technologies have made high-quality U.S. goods more competitive with other countries. The cost advantages of reshoring don’t end with operational savings—reshoring increases a customers’ trust in the product, helping a business grow and establishing ethos.

The Cost Advantages of Reshoring Production with a Domestic Machine Shop

When purchasing U.S. metals from a trusted domestic supplier, companies know they will get a quality product. Domestic sourcing reduces product quality risks and increases flexibility in production planning and customer responsiveness.

As evidenced above, companies should waste no time rethinking the supposed advantages of offshoring. While the costs might appear lower upfront, the risks and hidden costs outweigh the benefits. An ISO 9001-certified U.S. machine shop can strengthen supply chains by offering speed, flexibility, and confidence in a product’s quality. Eliminating the risks and costs of using offshore vendors is also going to save money.

At Plethora, we are proud of our Manufacturing as a Service (MaaS) model of business. We feature professional machinists and engineers working on the best equipment in the industry. We offer ISO 9001 certification and constantly seek ways to improve our processes to provide our customers the highest quality service possible. Our online DFM and quoting systems are ready to receive your data so we can begin working with you on your next project. To get started, upload your design files to Quote My Part or call us at 415-726-2256.Quote My Part


The Plethora Team

The Plethora team is your go-to CNC manufacturer for hardware done right the first time. We have the tools and experience needed to create high quality custom parts quickly and with precision, whether you need a prototype or production run.

Topics: materials, Design, Manufacturing, finishing, CNC machining, Quality, Prototyping, reshoring