It’s no secret that we feel like reshoring is the way to go. It seems to be the general consensus too. Worldwide more and more companies are reshoring their production. Just have a look at this article to see some of the big names. 76% of US companies with factories in China are considering reshoring. That’s an insane amount of interest in reshoring and I’m glad to see it.
We’ve championed reshoring in the bike industry already, and will continue to do so. But it’s important to actually look at what’s involved in reshoring too. It’s not as simple as just making your bikes at home unfortunately. It requires an entire system to be built to facilitate demand and make the process efficient. This means partnerships between manufacturers and raw material producers, delivery companies, etc. In short there needs to be a clear supply line in place.
Setting up this supply line is the biggest challenge to reshoring, this is why cooperation is so essential. The payoffs are great though. Companies have access to a much sturdier and more efficient supply chain than offshoring makes possible.
Not all companies will be able to fully reshore either. In this case nearshoring should still be considered though. Parts from Portugal are still greener and more efficient to get than parts from China. At the end of the day it still comes down to the establishment of new and improved supply chains.
What’s The Problem With Offshore Supply Chains?
To really understand the push for reshoring need to look at offshore supply chain problems. One of the biggest reasons for companies to reshore is to avoid offshore risks after all. Covid-19 impacted the global supply chain massively. Lockdowns on a national and international level disrupted the flow of goods and ground the flow of goods to a halt. For the most part though the pandemic just brought to light pre-existing problems in the supply chain.
The pandemic didn’t cause inefficiencies in the supply chain so much as exacerbate them. It was always slower to import bikes from China and there could always be quality assurance problems. But stricter border controls and reduced staff made these problems both more likely and more difficult to solve. While these problems will begin to ease over time the pandemic has shown that the global supply chain is fragile.
This fragility comes from multiplying the point of failure. Think of a train. Every carriage on a train is pulled by one engine. This minimizes the points of failure. If instead each carriage had its own engine the chances of something failing is multiplied by the amount of carriages. When we look at an international supply chain extra points of failure are added. Customs at border crossing, extra shipping logistics and production bottlenecks are only some of the problems faced by the global supply chain. When anything goes wrong in this chain companies face delays, stock shortages and lost revenue.
By reshoring production companies gain access to a decentralized supply chain that produces goods as close to home as possible. No need to cross borders, logistically simpler supply chains and decreased risk of production bottlenecks as production is spread over a wider area.
Where Offshore Has An Advantage
There is one way that offshore production has an advantage on onshore production (for now). No, I don’t mean costs. The supply chain is already in place. What I mean is that the infrastructure is all there and technically functional. This comes with it being an industry standard practice for so long. Sure everything still needs to be carefully managed but the system is all there already. Production facilities already exist and they have suppliers.
To really make reshoring effective partnerships need to be built up between each link in the supply chain. A manufacturer needs reliable access to local raw materials for example. When one of the big reasons for shifting to onshore production is to reduce risk the infrastructure for reshoring needs to be robust. That only happens if we put in the work to develop strong links.
Building Onshore Supply Chains
No company can reshore entirely on its own. Even using in house manufacturing and assembly a company still needs access to raw materials and shipping. Obviously if they want to use white label services to manufacture and assemble their bikes that adds more to the mix.
For in house production to be viable it means investing in manufacturing facilities and finding a reliable supply of raw materials. To do that requires serious investment. In general it is probably easier to outsource manufacturing to a domestic company.
This is where we can make reshoring truly viable. By developing a network of white label production and assembly companies we are able to develop solid links with raw material producers and streamline the reshoring process. By developing a network of companies domestically we can get rid of the advantage that offshore production currently carries.
White label companies are able to have partners already in place as well as backups for the entire production process. We are able to decrease the risk of reshoring through these networks making it a more viable option to companies currently offshoring to move back to the UK.
Most importantly white label companies streamline the process. Just as they do in Asia really. By working with white labels you don’t need to find your own materials and parts. You can instead work with their suppliers and partners. Even storage and delivery can be taken care of.
The Need For Partnerships On The Business Level
Setting up a facility still takes time and investment though. Trust us on that one. A company can’t just set up fully formed overnight. To cover for this the reshoring process needs to be a collaborative effort.
You can take Route Assembly as an example of this. While our goal is total reshoring to the UK that’s not something that’s viable from day one. Instead we offered sourcing and UK assembly while partnering with nearshore companies to produce frames and wheels. Any company looking to reshore will probably go through a phase like this.
Besides the obvious need to develop partnerships with raw materials producers and shipping companies it’s important for manufacturers to develop partnerships with each other. While it’s natural to view other manufacturers as competition the reshoring effort is bigger than that.
“When a customer approaches us, I of course recommend other Portuguese companies—even if I don’t get the order,” , that’s a quote from Felipe Morta at InCycles. In the article it comes from he attributes a lot of the recent explosion of Portuguese bike manufacture to collaboration. He has a point too. The collaboration between companies allowed for a much stronger industry.
Let’s say a customer wants more bikes than you’re readily able to provide. You could try and take it on anyway and the customer has a longer lead time. You get the money and the customer gets their bikes with a little delay. All that seems fine, but it’s one of the big reasons for the current production bottleneck. Instead if you send them to an offshore or nearshore manufacturer you might be losing out to a “competitor” but the industry is strengthened.
Where Does That Leave The Reshoring Effort?
Look, we‘re not going to pretend that the only issue a company faces when reshoring is the supply chain. It is a major obstacle though, and one we can overcome.
For companies that are currently offshoring the supply is in disarray. Lead times have become excessive and it’s become more expensive. It’s also more logistically demanding even at the best of times.
It’s also a cost and time intensive process to change to onshore production while you do it in house. Needing to set up partnerships with domestic shipping companies and producers of raw materials. Not only is it difficult, it’s also a risk.
Domestic white label services help to accommodate this. Instead of setting up a network themselves, reshoring companies are able to take advantage of pre-existing networks. White label companies can bring their own connections to the table and take over the majority of the work. Boosting domestic industry while reducing the risk to reshoring.
However it’s important to look at reshoring as more than a business opportunity, Reshoring is a movement that helps the world become more eco-friendly and build an industry on a domestic level. Bearing that goal in mind we need to move past the idea of rival companies and instead work collaboratively to create a domestic industry we can be proud of.