what is onshoring

Due to various limitations in global transportation, communication, and technology, manufacturing was largely a domestic process in the United States until the early 1980s. The development of computer-based automation technologies, programmable logic controllers (PLCs), and cheap offshore labor led many companies to move production outside of the United States. This trend continued throughout the end of the 20th century and into the 21st, before onshoring made a resurgence yet again.

While some operations were sent to close neighbors such as Mexico, the bulk of manufacturing operations moved to Asia due to the size, availability, and affordability of labor in that region. As ocean shipping became more affordable with the advent of larger and faster vessels, outsourcing manufacturing across the Pacific became even more feasible.

Now the path of American manufacturing has changed once more. Companies are starting to onshore manufacturing back onto U.S. soil and partner with domestic manufacturers for outsourced tasks. This is due to a vast range of political changes, rising labor costs in developing markets, and the increased demand for higher-quality products and intellectual property (IP) protections.

What Is Onshoring?

Onshoring—also known as reshoring—refers to the practice of moving manufacturing operations from foreign soil back to the United States. Onshoring may also refer to the practice of outsourcing to domestic contract manufacturers rather than overseas. As the cost benefits of offshoring fade away, more American-based manufacturers are seeing the benefits of domestic production.

Domestic manufacturing has several financial and logistical advantages. Onshoring has seen a resurgence in popularity in the manufacturing world for the following reasons:

  • Negligible cost differences. Shipping costs involved in offshoring and nearshoring processes continue to rise. Labor costs in developing Asian and Central American markets are also rising. This means that the significant savings that incentivized offshoring in the late 20th century have been largely reduced or eliminated.
  • International politics. Unstable trade relations have made the cost of doing business in Asia less appealing than it once was. Instead, many companies are creating a blend of local onshoring and nearshoring production techniques to appeal to domestic markets. This localized control also allows companies to better comply with regulatory demands and quality control requirements.
  • Non-costed factors. Companies must consider less immediate costs, such as not conforming to material standards, variations in product quality, and potential losses of intellectual property rights. Reshoring manufacturing or using domestic third parties allows companies to operate within one primary set of regulations.
  • Supply chain management.Onshoring operations and using domestic partners often allows companies to operate in the same time zone as the companies they hire. It also reduces language barriers, cultural barriers, and transportation complexities.

Onshoring is an increasingly popular outsourcing method for several industries and project types, such as:

  • Automotive production
  • Parts manufacturing, including zinc die-cast mold tooling and thermoplastic injection molding
  • Complex manufacturing processes that require a lot of communication

Onshoring, Reshoring, Nearshoring, Offshoring—What’s the Difference?

A variety of terms are used to describe the various manufacturing location strategies companies use for production.

Onshoring

Onshoring is the practice of moving physical manufacturing practices to the United States, whether that means moving physical assets or cancelling existing relationships with foreign contractors in favor of outsourcing to American companies. The services and production tasks are handled inside the company’s primary country in order to reduce complexity, control quality and costs, and avoid transportation and regulatory hassles.

Reshoring

Reshoring is the same basic concept as onshoring, and the two terms are often used interchangeable. The only subtle difference is that reshoring refers to a returning of manufacturing operations to the United States, implying that the operation was once moved out of the country. Reshoring occasionally has political overtones, but the return to domestic outsourcing and manufacturing is based on changing economic realities. Foreign outsourcing practices, for many companies, no longer offer the savings they used to offer.

Nearshoring

Nearshoring refers to the movement of manufacturing assets or outsources to third-party companies outside of the United States while keeping them close enough to facilitate affordable shipping and related supply chain costs. American companies commonly outsource to Mexico due its convenient proximity and lower labor costs. Nearshoring is often a viable manufacturing or outsourcing model for companies that serve both domestic and nearshore markets.

Offshoring

Offshoring involves outsourcing manufacturing or moving assets outside the primary country of operations and outside its primary market groups. American companies have traditionally offshored manufacturing to Asian or Southeast Asian regions, such as Bangladesh, China, India, Vietnam, Thailand, and many others. Offshoring has traditionally been used in situations where production, materials, and labor costs outweigh travel complexities and shipping costs, but this practice is starting to make less business sense as time goes on.

How Trump Sparked Onshoring in the US

President Trump began his term by offering incentives to companies that returned to domestic manufacturing. These businesses would be rewarded for onshoring and strengthening domestic manufacturing markets. Simultaneously, manufacturers that continued to use offshoring and nearshoring practices would face increased taxes or other financial penalties.

Rebuilding a solid manufacturing sector in the United States has been an important goal for President Trump’s administration because the growing focus on the service sector has the potential to reduce domestic manufacturing expertise in the country. Trade conflicts and a focus on domestic production have contributed to the growth of over 500,000 new manufacturing jobs in the United States.

These transformations have been seen in the following industries:

  • Steel and aluminum
  • Parts fabrication and injection molding
  • Electronics
  • Industries with complex products that need highly automated manufacturing

When to Outsource and When to Localize Production

Outsourcing certain processes makes sense for many businesses, as it allows them to focus on their own core competencies without investing undue resources in equipment, labor, and processes they aren’t familiar with. Companies become more profitable when they specialize, keeping just a few select tasks in-house and using other specialized companies to handle the rest of the process.

Onshoring and reshoring are increasingly popular to get the best of both worlds. Companies have the same easy communication and lowered barriers to collaboration as they would with internal production but benefit from lowered costs and specialization.

In order to onshore profitably and efficiently, companies should carefully evaluate their costs and build long-term domestic partnerships, facilities, and processes. When beginning the shift to onshoring, companies should:

  • Evaluate local, state, and federal incentives.
  • Search for trusted third-party production sites that can handle their designs, material requirements, and quality control standards.
  • Find large enough population centers to fill job openings
  • Locate in proximity to third-party manufacturers to optimize supply chains.

While offshoring is still a popular manufacturing choice for multinational corporations, the value of onshoring is continuing to grow. Companies should focus on viable onshoring methods when they:

  • Focus on domestic and nearshore markets.
  • Need smarter and more automated production methods handled by highly skilled workers.
  • Can access government incentives that outweigh the short-term costs of changing production locations.
  • Want to build long-term production processes that protect their IP rights and reputation of high-quality production.

Case Study: Onshoring Plastic Injection Molding

Plastic injection molding is a critical task in manufacturing for a broad range of industries. This process is essential for creating small, medium, and large production runs of identical parts. Using onshore plastic injection molding companies brings more value to your business with benefits such as:

  • Faster lead times. Local production is faster. Onshoring your plastic injection molding processes means the molds can be cast and the parts can be formed and cured on a shorter timeline.
  • Creating customized products gives your company more control, flexibility, and market appeal. Onshoring plastic injection molding makes it simpler to finalize designs and production runs of the precise parts you need. 
  • Greater quality control. Companies like PTR Tool & Plastics offer domestic injection molding and other production methods that meet or exceed U.S. industry standards. Every process can be customized to meet your company’s quality control standards, and local productions communication is fast and simple.

Why Die Cast Tooling Is Returning to America, As Well

Die cast tooling demand is also returning to domestic facilities. A survey of die casting companies in the North American Die Casting Association found that 23% of the members were seeing a resurgence of business that offshore competitors had previously handled.

This may be due to the reduction of savings from using offshore labor and the hidden costs of offshore manufacturing. These offshore costs include quality control difficulties, shipping costs, design restrictions, and concerns about IP.

Domestic die cast tooling ensures that the initial part molds accurately represent designs and specifications so the actual die cast production runs are higher quality.

PTR Tool and Plastics — Your US-Based Molded Plastic Supplier

Outsourcing manufacturing processes is a smart way for companies to focus on their core specializations. Of all the different location-based outsourcing methods—onshoring, nearshoring, and offshoring—onshoring is seeing a resurgence in popularity and value. Using local third-party manufacturers gives companies streamlined production schedules, higher quality products and tighter quality control, and savings in manufacturing costs. As parts become increasingly complex and specialized, it’s important to find manufacturers that offer high-quality mold processes that can handle increasingly complicated designs.

PTR Tool and Plastics features high-quality plastics manufacturing processes based in the United States. Our services include injection molding processes, die cast tooling, design services, and mold flow analysis. We are a leading supplier of high-precision mold tooling and mold components.

Contact us today to learn more about our turnkey custom injection moldings and tooling services.

 

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