Reshoring – what is it and how to prepare

Offshoring and reshoring are relatively new concepts in the realm of manufacturing and production. As an experienced business consultancy agency covering areas such as recruitment, supply chain, training, and more, we know just how significant reshoring can be. Read below for expert insights on reshoring, including its challenges, benefits, and what it means for the future of UK manufacturing.

What is reshoring?

Reshoring refers to the practice of relocating parts of the whole of a production or manufacturing operation that has been moved overseas from its country of origin. This represents a huge boost to the economy of the country in question, as it creates more jobs and helps balance trade deficits. Reshoring is different to insourcing, as the former has a geographical focus whereas the latter revolves around the idea of completing business functions in-house regardless of whether the operation had been moved overseas. Companies may also engage in ‘nearshoring’, which is where they move production to another country that’s closer to home.

Companies often move their operations offshore to access financial benefits such as cheap labour, lower production costs, and access to resources. The practice started in the 1990’s, with companies often moving to China due to the incentives offered by the government. Reshoring typically occurs when circumstances disrupt these benefits, leading to higher costs. Other potential factors in reshoring might include:

• Better quality control.
• Greater supply chain management.
• Flexibility, agility, and resilience.
• Ease of communication.
• Focus on sustainability.
• An economic downturn in the country where a company has moved their operations to.
• A breakdown in relations between the two countries. A good example of this can be seen in Apple’s continued move of production from China to India.

Why are manufacturers reshoring?

It’s often the case that businesses move their production processes offshore due to poor economic conditions. Prime examples include the 2008 recession and most recently the Covid-19 pandemic. Both these events created problems for domestic manufacturers that incentivised offshoring as a means to maintain profitability. However, four years on from the global pandemic, the UK economy is beginning to strengthen. The latest economic update from House of Commons Library (at the time of writing) sees a rise in the average forecast GDP growth and inflation falling back in line with the Bank of England’s 2% target.

Earlier in the year, the BBC reported that companies are reshoring due to ‘economics, risk, and politics’. Due to recent global events, there is a lot of perceived risk with offshore production. Additionally, further supply chain issues are likely to arise in the event of global shortages, which reshoring would help protect against. Finally, politics naturally drives reshoring as leaders want domestic businesses to keep their operations in their country to fuel the economy. In the 2023 Autumn Statement, it was announced that there would be permanent tax incentives for UK businesses to invest in domestic production.

What does reshoring mean for UK manufacturing?

Companies moving operations back to their home country will need to hire domestic talent to replace overseas workers. As a result, recruiters and prospective employees should expect rising demand for qualified STEM talent. This is on top of the likely increase in demand for contractors to help businesses complete the reshoring transition. Read our other blog on ‘Why recruiting for an interim position could benefit your business’.

Reshoring incentivises businesses to focus making on long term improvements to their supply chain. This is because it helps to bolster supply chain resilience. Embracing technology advancements will also help reshored businesses keep costs down in relation to the cheap infrastructure offered offshore.

Get the most out of your supply chain

At The Jigsaw Business Group, we are constantly analysing the landscape of global supply chains, recruitment practices, and more. This is so we can deliver bespoke support to our clients and help them achieve the best outcomes. Our supply chain management services are versatile, able to adapt to the needs of your business. So if you are considering reshoring your operations, or you are affected by UK reshoring, contact us to learn more about our supply chain consultancy services.