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Reshoring – 8 reasons to move production back to Europe

clock3 mins Read
calendar 03/08/2023

With the increasing costs associated with running a business escalating, companies are increasingly turning to their supply chains to identify ways of cutting costs and improving efficiency. Reshoring refers to a company transferring operations from overseas locations back into the country of origin. Alexander Battery Technologies have identified eight key factors that we believe determine the decision of a manufacturer to reshore that fall into either push or pull factors.

Push Factors

Rising labour costs:

Perhaps the biggest factor in increased production costs, labour rates have seen massive increases since the original Chinese manufacturing boom. The cause of this has been a large increase in the number of skilled workers in the country, enabling the factories to have more advanced machines to complement their increasingly complex manufacturing processes. We have had conversations with OEMs that realise Chinese manufacturing is no longer the low-cost approach and have planned to reshore their manufacturing.

Quality control concerns:

OEMs have found managing quality concerns caused by overseas manufacturing extremely challenging. These issues can be difficult to manage and tough to amend. OEMs that reshore have the benefit of increased control over their supply chain due to the proximity of HQ and manufacturing operations.

Supply chain disruptions:

Supply chain disruptions cause unexpected costs for businesses. In a world where consumers want products fast, supply chain disruptions can be a nightmare for OEMs. The recent Suez Canal blockage cost an estimated $400 million an hour, with companies having their products in an unavoidable delay in deliveries. OEMs that have reshored a massive advantage compared to any of their competition that hasn’t made that step.

Political reasons:

Political instability can be a factor for companies to reshore to a more familiar political climate. With Covid still an issue in China, the risk of a lockdown is ever-present. As a result, products crucial to an OEMs supply chain have an increased risk of being delayed. A more familiar political climate provides a predictable environment for OEMs to operate.

Pull Factors

Proximity to market:

In some cases, reshoring manufacturing will enable an OEM to be closer to its target market, significantly reducing the lead times associated with the shipment of goods. With this, there will also be a significant reduction in shipping costs, which along with shorter delivery times, can give an OEM an advantage over their competition.

Enhanced control and flexibility:

With shorter lead times, OEMs can respond quickly to changing market conditions, allowing them to bring any additional optimisation features to the market quicker because of having locally based operations. Companies that have already reshored also can be agile and meet any unexpected, immediate demand for their product due to their shorter lead times.

Skilled workforce availability:

A driving factor for OEMs to reshore is access to a highly skilled workforce. OEMs looking to reshore to the UK with Alexander Battery Technologies will have access to highly skilled workers who have many years of relevant industry experience throughout the company.

Government incentives:

Governments often provide incentives to OEMs looking to reshore due to the economic benefits it will provide the country. These can include; subsidies, tax breaks, or other financial incentives that make the idea of reshoring more attractive for the business. Despite the logistical challenges of reshoring, OEMs can gain a significant long-term advantage over their competitors.

Alexander Battery Technologies is helping businesses reshore their manufacturing, and we would like to help you do the same. If you would like our help in reshoring your manufacturing or need a knowledgeable battery pack manufacturer, please complete the contact us form.

Author

Andy Taylor

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