To Reshore Manufacturing or Not to Reshore

Are you considering a plan for Reshore Manufacturing? Is your company rationalizing its global manufacturing footprint or expanding to keep up with growth?

When it comes to manufacturing and supply chain costs, recalculating outsourcing and supplier decisions based on today’s reality can reveal some significant savings opportunities. With so many factors to consider if you want to reshore manufacutring, from tax rates to supplier and customer proximity, every manufacturing sourcing or site decision is unique.

For a quick overview of the current global cost situation and trends, check out the Boston Consulting Group’s Manufacturing Cost-Competitiveness Index. Looking at the report—which combines the costs of labor, electricity and natural gas— Mexico is more cost competitive than China. The country has benefited from moderate wage growth, productivity gains and favorable currency fluctuations. Among the top 10 exporting nations in the world, costs in the United States are second lowest after China. Manufacturing costs among the remainder of the leading exporters are 10% to 25% higher, with France, Belgium and Italy being the most expensive countries.

Four reshoring elements to consider:

Wage inflation, exchange rate fluctuation and higher freight and transportation have steadily eroded the business advantage of manufacturing in the world’s low cost regions, especially China.
Reshoring can be especially beneficial if you have excess capacity at home or are experiencing inconsistent quality, higher costs and growing customer demands for flexibility and faster delivery times.
Before deciding, carefully evaluate your current capacity and existing capabilities, especially the cost-competitiveness of your local labor market and the bandwidth of any management team.
Successful reshoring also offers an opportunity to redesign a significantly leaner production process with less waste, better productivity and a sustainable cost advantage.

Some years ago the executives at Pacific Handy Cutter Inc., (PHC) a TBM client, decided that manufacturing in the United States was a better choice for their newest product because of rising labor costs, long lead times and quality issues with their existing supplier. As detailed in this TBM case study, PHC even anticipated revenue growth from increasing customer demand for U.S.-made hand tools.

Frequently Asked Questions

Why does TBM emphasize “re‑shore” rather than simply reshoring manufacturing?

TBM emphasizes “re‑shore” to highlight that bringing production back is not just a geographic move but an operational transformation. The article explains that reshoring without redesigning processes, management systems, and cost structures often recreates the same problems domestically at a higher cost. “Re‑shoring” means rethinking how work is done so operations are competitive, flexible, and sustainable in a higher‑cost environment.

What risks do companies face when reshoring without operational changes?

Companies that reshore without operational changes risk higher labor costs, lower productivity, and reduced competitiveness. The article notes that simply moving inefficient processes closer to home amplifies waste, variability, and management gaps. Without improvements in flow, standard work, and daily execution discipline, reshoring can lead to disappointing financial and service‑level results.

What operational capabilities are required to successfully re‑shore manufacturing?

Successful re‑shoring requires strong operational fundamentals, including lean processes, stable production, disciplined management systems, and a skilled workforce. The article stresses that improving productivity, reducing lead times, and increasing flexibility are essential to offset higher domestic costs. When companies focus on these capabilities first, reshoring becomes a strategic advantage rather than a cost burden.