Reshoring Challenge: Supply Chain

Reshoring is happening, but not as quickly as we might like. One of the major reasons is the weakness of the supply chain in the U.S.

It’s basic economics. One quarter of U.S. factories headed overseas during the Great Offshoring. Demaqnd for parts and raw materials fell sharply in the U.S., and suppliers for those parts and raw materials went out of business or changed their produce assortment.

Now, manufacturers who build factories in the United States have a hard time sourcing parts and raw materials in the U.S.

For raw materials, there are trade-offs in quality and cost. For parts, the manufacturers who have made big changes and serious investments to get their factories back on U.S. soil don’t get to display that “Made in America” sign on their products if they’re importing the parts.

Consumer see “Assembled in America from Imported Parts” as much less than “Made in America.” But they’re not necessarily willing to pay prices that make it possible for manufacturers to buy parts locally. In many cases, that would mean working with a potential supplier to bring back the manufacture of those parts in the U.S. Parts suppliers would have to invest in additional capacity… if they were willing to go back to making parts they gave up out of necessity.

Walmart has done some matchmaking between the companies saying, “We’d buy them here if we could” and those saying, “We’d make them if we were sure of a market.” But even with support from the retail giant, it’s hard for anyone to know what kind of cost they’d be looking at. Manufacturers have to be able to compete with goods made in China.

Here’s where things can get political. The Trump administration has threatened to impose punishing taxes on companies bringing foreign parts into the U.S. With U.S. wages and the inevitable cost of increasing automation, U.S. manufacturers are already feeling the financial pinch of reshoring. With high tariffs on imported parts, they’ll be caught between a rock and a hard place.

The winners may be the companies that can provide automation in a practical and cost-effective way.

If you’re ready to add industrial motion control to your facility, contact us. Using Rexroth electric drive and control technology can be very cost-effective when you take advantage of the strength of the Rexroth legacy components. Remanufactured parts under warranty can make the difference. We have the largest inventory of Rexroth and Indramat drives, controls, servo motors, and power supplies in the nation.

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