Are we ready for reshoring?
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Are we ready for reshoring?

An interesting phenomenon is taking place, which I have been following for the last few of months. With the economy improving and the banks back in profit, is now the right time to re-invest in our own manufacturing base. I’ve read many reports on the ‘forget made in China’ but I’m concerned that we, as a country are not ready for this? This is an extract from what I read recently:

Rising labour and energy costs have made manufacturing in China significantly more expensive; transportation costs have risen; companies have become increasingly aware of the risks of the theft of intellectual property when products are made in China; and in a business where time-to-market is a competitive advantage, it is easier for engineers to drive 10 minutes on the freeway to the factory than to fly for 16 hours.”

I was in a factory in Manchester the other day when the ‘boss’ said to me that they are exporting their product to China, even though they have a site over there, because the Chinese themselves would rather have the UK made product because the quality and reliability is so much better.

I took the following from another article I read regarding food production:

“Reshoring: companies bring production home from China

Leeds noodle-maker is not the only manufacturer to find off shoring to China no longer makes sense

FORGET the era of ‘Made in China’. The latest business phenomenon is ‘reshoring’, where companies in America and Britain are bringing manufacturing home.

In the UK, the weakness of sterling has made the prospect of repatriating jobs even more alluring. Food manufacturer Symington’s is reported today to be moving its noodle-making operation from Guangzhou, China, back to Leeds, Yorkshire. The company, which also makes pasta sauce Ragu and Chicken Tonight, is creating 50 jobs in the process.

Henrik Pade, business development manager at Symington’s, tells the Financial Times it now costs “roughly the same” to make Golden Wonder pot noodles in Yorkshire as it does China.

“Everybody prefers to do manufacturing on their own doorstep rather than far away, which means you need to have a financial incentive to outsource”, he said. The firm said it had once cost 30-35 per cent less to make the noodles in China, but wage inflation there and freight costs had pushed up production costs.

Symington’s is just the latest company to try ‘reshoring’. The FT notes that clothing manufacturers Top Shop and River Island have also been purchasing more materials from domestic suppliers.

The chief economist of the manufacturers’ association EEF, Lee Hopley, claims ‘off-shoring’ is now “yesterday’s model”. EEF figures show that 40 per cent of manufacturers have brought some of their capacity back to the UK, up from one in seven companies in 2009.

The phenomenon isn’t confined to the UK. BBC correspondent Mark Mardell reported on Radio 4 at the weekend how US manufacturing giant General Electric has repatriated jobs from China to its vast plant in Louisville, Kentucky.”

And then there is Google: this looks at the idea of lead time of customizing the product in response to the customer demands:

Google Taking the Lead on “Reshoring” Movement?

One of Google’s newest products—the Nexus Q—has an interesting new feature. In addition to the futuristic design, the product has one, more unique, characteristic: It was manufactured in America.

As the New York Times reports, Google is beginning to experiment with shifting some of its manufacturing to the US. Bucking the trend in Silicon Valley, where nearly all manufacturing of small electronics has long since shifted to China, Google’s products have been manufactured entirely in a California factory, and nearly all of the components are American as well—which is also a rarity. Although this is only a test run, and will only be implemented on one of Google’s many products, a successful result could inspire Google—and others in Silicon Valley—to implement a similar process on more of its products. We have discussed the nascent phenomenon known as “reshoring” before on Via Meadia; Google’s decision shows that major companies, and in this case one of the most forward-thinking companies in the world, are engaged with the idea.

So, with 40% of UK businesses bringing production back to the UK are we ready. Do we have the following in place?

  • Quick response to customer changes
  • Removal of waste for shorter lead times and response to customer demands
  • Faster product to market
  • Flexible workforce
  • Managers as Leaders
  • Systems of improvement
  • Quick changeover
  • Waste free administration processes
  • A robust practical problem solving process
  • Fully engaged people
  • Clear value streams
  • Fully cascaded and bought into strategy at all levels
  • Strong linkage with suppliers and customers
  • LEAN…………
  • GREEN…….

 

Well there you go, let me know any thoughts you may have. 

Are you ready for reshoring? We are happy to come and discuss this with you. We will also help you in determining your lean maturity in readiness for ‘reshoring’.

Get in touch at: Michael.moreton@sapartners.com

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