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Taking Nearshoring to a Whole New Level

  • John P. Collins
  • Eric P. Jack
  2017

Twenty years ago, large numbers of North American businesses began offshoring in order to reduce their manufacturing costs. Access to cheap labor was compelling, and these companies moved some, if not all, of their facilities to other countries either through wholly owned operations, partnerships with local entities, or independent suppliers.

However, many of these firms soon learned that the relative labor rate alone isn’t the best comparison to determine when to offshore and that, when all-in off-shoring costs are considered, a lot of the financial advantages are negated. Expenses related to start-up, vendor selection due diligence, travel, shipping and duty fees, potential quality problems, possible theft or piracy, and even just additional paperwork all have an impact on the bottom line.

From that experience came a better understanding of landed costs—the actual total price of manufacturing a product. This insight helps supply chain management professionals clarify whether offshoring makes sense for their businesses or if, in fact, nearshoring or even reshoring is most appropriate.

Tracing back to the first 3D printing patent issued to Charles Hull in 1986, it’s interesting to note that this period also was roughly the dawn of this nascent industry. What started as an expensive but quick way to prototype parts now seems poised to become a force unto itself that will challenge everything we know about manufacturing. 3D printing has become so ubiquitous—its capabilities now are way beyond the prototype stage and the variety of materials that can be used have grown exponentially—that American comedian Jay Leno even talks about using a 3D printer to create parts for his Stanley Steamer automobile.

Putting it together

So, what does all of this mean for today’s manufacturers? Well, it means a lot, according to The Economist article “A Third Industrial Revolution,” which says the digitization of manufacturing is as significant as the mechanization of the textile industry and the introduction of mass production in the automotive sector. The contention is that the ability to produce smaller batches of items tailored to specific customer needs at significantly lower costs could make the factory of the future look more like the weaver’s cottage than Ford’s assembly line. 3D printing also promises to redefine the skill sets of factory workers, as design and programming receive greater emphasis.

The PLS Logistics Blog article “6 Effects 3D Printing Has on Supply Chains” suggests that global logistics effort will be reduced as manufacturers shift more of their facilities back to their home shores in order to take advantage of market proximity. In the global logistics provider’s words, “Part of the supply chain will become superfluous.”

Indeed, with 3D printing, it’s probable that inventory levels will fall because of the ability to rapidly respond to customer demands. Fulfillment processes also could be transformed, as manufacturers respond to orders directly from the factory. Stock locations might be consolidated and thus eliminate the need for numerous warehouses. Transportation routes likely will contract as a result of smaller manufacturing centers providing more local 3D printing.

Might it even be possible that 3D printing will supersede the concepts of nearshoring and reshoring? After all, where a manufacturing facility is located won’t matter much if customers can “deliver” the products they purchase at home via a personal 3D printer. Talk about nearshoring!

For those of us in supply chain management whose mantra has always been “speed, cost, quality, and flexibility,” 3D printing provides both an opportunity and a challenge. The opportunity seems straightforward: creating ways to incorporate the technology into our processes. The challenge is to achieve this integration innovatively while remaining competitive in an ever-accelerating marketplace. How is your business addressing this challenge? We would love to hear from you at feedback@apics.org.

John P. Collins, CFPIM, CSCP, is president of Sustainable Solutions. He may be contacted at jpc45@uab.edu.

Eric P. Jack, PhD, CFPIM, CSCP, is dean of the Collat School of Business at the University of Alabama at Birmingham. He may be contacted at ejack@uab.edu.

To comment on this article, send a message to feedback@apics.org.

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