off shoring trends reversed

Financial Times points to reverses in the off shoring trend

Over the last decade, there have been many manufacturing companies who have chosen off shoring for some of their key parts of their supply chain,particularly to the Far East and China.

There has been much coverage in recent months about this off shoring trend reversing – known as “reshoring” or “insourcing”. When this trend started to become apparent many commentators put the emergence of it down to the economic growth and development of the Chinese economy, which meant that labour costs had increased which, in turn, was eroding that particular competitive edge.

However a recent article in the Financial Times points to “other factors” that have reversed the trend towards bringing production back to the Western world.

In an EEF (Engineering Employers Federation) survey of 300 companies, the main reason given for re-shoring was to improve the quality of products and components, cited by 35 per cent. This was closely followed by certainty and speed of delivery and the desire to cut transport costs. The risk of supply chain disruption was cited by 23 per cent of companies surveyed, whereas only 16 per cent identified the erosion of labour cost benefits as being a significant factor in the decision making process.

Silcotec Europe works well with suppliers in China for “ off the shelf” components in their complex cable harnesses and electromechanical assemblies and, in fact, a delegation from the group visited China this quarter to meet with their Chinese colleagues.

Stephen Bullock, Silcotec Europe’s CEO, said: “While it will always be two-way traffic, the increasing need to be closer to customers, to have ever greater control of quality and the continued erosion of low labour costs in some competitor countries means that in many cases it makes increasingly sound business sense to reshore products which are critical to the supply chain”

Paul Bullock, Group Operations Manager who led the China delegation commented: “We put huge value on the work of our Chinese suppliers. However, we are now finding increasing concerns raised by our European customers many of whom are becoming far more nuanced in their approach to supply chain management. The notion of “risk” is now higher on their agenda in this context. ”