The Rising Tide of Reshoring Success

Why Reshoring is More Critical Than Ever in 2024

It’s no secret that environmental sustainability, economic resilience, and geopolitical stability are the three core pieces of a global puzzle, and as a result ‘reshoring’, the buzzword for every manufacturing firm, has taken on a new level of importance. The drive to reduce our carbon footprints through shorter supply chains is a key reason for many companies to focus on this approach, but there are a growing number of additional reasons for reshoring.

The lasting impacts of the pandemic have exposed the weaknesses of global supply chains, revealing how quickly and how severely they can be disrupted by unforeseen events. These disruptions have shown clearly the dangers of relying on long-distance suppliers, and amplified the risks presented by the current geopolitical tensions, including trade wars, economic sanctions, and regional conflicts. These factors have made the predictability of international trade more challenging, highlighting the importance of sourcing materials and manufacturing products closer to home.

In addition to this, the recent energy crises, made worse by geopolitical disputes and the transition towards renewable energy sources, have highlighted how vulnerable international supply chains are to fuel price spikes and energy availability. This situation has reinforced the need for reshoring to ensure energy security and reduce our dependency on volatile energy markets.

The reshoring movement is also gaining momentum as a response to increasing nationalism and protectionism. Countries are looking inward, focusing on bolstering domestic industries to secure jobs and build economic resilience. This shift is prompting a rising number of businesses to reconsider their supply chains, looking to reduce risks by localising both production and sourcing wherever possible.

Economic factors, such as currency fluctuations and rising labour costs in traditionally low-cost countries, give further reasons to reshore. The gap in manufacturing costs between domestic and overseas production has narrowed, making reshoring a more economically viable option. Advances in automation and smart manufacturing technologies are also reducing the labour cost advantage of offshore production, making local manufacturing more competitive.

The environmental benefits of reshoring are also more relevant than ever, as companies strive to meet ambitious carbon reduction targets. Localising supply chains can significantly reduce transport emissions, contributing to global efforts to combat climate change.

Brexit continues to reshape trade dynamics for the UK, with increased border controls and regulatory differences making European trade more complex and costly. Reshoring offers a strategic advantage by reducing reliance on EU suppliers and circumventing the challenges posed by Brexit, enhancing supply chain resilience and agility.

But despite these convincing reasons for reshoring, challenges remain. Not all raw materials or components are available domestically, meaning some level of international trade will always be necessary. However, the aim is to minimise these dependencies and support local economies wherever possible. Success stories, such as companies significantly localising their supply chains, do show the rest of us what is achievable.

Don’t take our word for it; Albert Jagger, an industrial hardware specialist, undertook a comprehensive review of its supply chain and concluded that the total costs associated with procuring from China, once shipping, port handling, and environmental impacts were considered, were higher than producing domestically. Albert Jagger invested £300,000 in equipment to manufacture their products in the UK, leading to greater control over the supply chain, reduced environmental impact, and ultimately, a significant increase in production output from the forecasted 750,000 units to 1,500,000 units per year. This not only enhanced their supply chain resilience but also allowed them to avoid price wars by offering better availability and service to their customers.

Encouragement and support from national governments, through tax incentives, grants, and strategic planning, are crucial for making reshoring a widespread reality. These measures can catalyse the transition, supporting businesses in adapting to this new economic landscape.

For manufacturing firms facing the challenging markets of 2024, reshoring is both an economic strategy and a sensible, strategic approach, embodying a shift from globalisation towards a more localised and resilient economic model. With luck, this will deliver benefits for businesses, communities, and the planet.