With the cost advantages of overseas manufacturing dwindling, particularly for U.S.-based discrete manufacturers selling to domestic customers, many companies are shifting some or all manufacturing back to the United States. Some already enjoy the benefits of a domestic environment that is far friendlier to manufacturing than it once was; in fact, ‘reshoring’ initiatives led to an increase of 400,000 U.S. manufacturing jobs between 2010 and 2016.
This post discusses the advantages of reshoring and how deploying the right systems helps manufacturers make the most of those advantages.
With the direct costs of manufacturing nearly equal between the U.S. and many so-called low-cost trading partners, your company can do better from both top line and bottom line perspectives via manufacturing here at home. Why? Because the advantages are both market-facing and cost-saving.
Telling U.S. consumers that your product is made in the USA has a substantial impact. With all other factors being equal (or nearly equal), U.S. consumers prefer to buy American-made products. Moreover, B2B buyers always seek to get as close to their supply chain partners as possible.
Being able to adjust for flexible production runs means you can offer customers the option to ‘have it their way.’ If you sell B2B products, you can increase customer loyalty by making some products in smaller batches for specific customers.
You can also adjust production lines in response to design changes and speed your time-to-market by generating prototypes quickly, obtaining faster feedback, and turning around the final product faster than foreign competitors.
Because of the highly educated workforce and your staff’s proximity to the U.S. consumer, you can provide rapid response in numerous areas, from customer service and in-field repair issues to development of ‘what-if’ scenarios and better sales insights.
Many states and the federal government are offering tax breaks and multiple incentives to companies considering reshoring. Those incentives escalate when the manufacturing operations involve technology areas seen as strategic to a state or the federal government. Currently, there are 1,795 incentive programs offered in the U.S., of which nearly 500 provide actual tax credits.
There’s nothing like being there to enforce quality control. When your product designers can meet in person with manufacturing engineers and other production staff, nothing gets lost in translation. Instead of relying on bi-annual trips that consume a lot of energy and lead to uneven results, your core teams can meet more frequently and continuously improve collaboration.
These can be a huge factor for many manufacturers. As energy prices rise around the world, the U.S. has become relatively inexpensive in its energy costs.
Copyright and patent laws are easier to enforce in the United States than in most other nations. If your company has intellectual property to protect, you run the risk of having it copied or stolen when manufacturing abroad. Recourse and recovery of revenue are very difficult, as overseas courts are not nearly as strict as U.S. courts regarding copyright and patent privileges.
Whether you call it Industry 4.0 or use some other term, advancement in digital industry and manufacturing automation, combined with falling software and hardware prices, are making U.S. manufacturers more flexible and efficient. In a recent BCG survey of U.S.-based manufacturing executives, 72% of respondents said they plan to invest in additional automation or advanced-manufacturing technologies in the next five years.
When you couple modern ERP systems with advanced manufacturing systems, manufacturers gain unprecedented advantages in speed, agility, and efficiency – which is why modern ERP systems are critical to reshoring.
You’re already aware that modern ERP systems streamline processes and unify all departments within a manufacturing company. Nevertheless, most manufacturers barely scrape the surface of modern ERP’s full capabilities for making reshoring cost efficient. For example, the business intelligence (BI) features of modern ERP can help you predict trends, proactively meet customer needs, make just-in-time a reality, and postpone final assembly until customer orders come into the system.
Traditional ERP systems weren’t designed to enable configure-to-order, make-to-order (MTO), and engineer-to-order (ETO) business models. In contrast, modern ERP can make the entire Kanban approach digital. You can use modern ERP for MTO by having your sales orders kick off MTO’s planned production and purchase orders. The Kanban “pull” mechanism that kicks off that process also provides the pull to kick off the creation of the drill-down levels of associated bills of materials (BOMs), including the purchasing BOM and manufacturing BOM. Rather than the pull signals being physical cards (as they were originally), they’re electronic signals in ERP and are given the same process urgency; because they’re tied to sales orders, they represent real demand.
The advantages of reshoring are extensive, and the confluence of advanced manufacturing technologies with modern ERP systems puts those advantages within your reach. To make this business transformation successful and use your ERP to its fullest extent, contact Sapphire Systems today.
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