Onshoring vs Offshoring: What’s Right for Your Business?

October 2, 2021

Perhaps you’re thinking about moving some aspect of your business operations overseas. Or maybe you’re considering repatriating processes currently handled overseas back stateside. Or it could be simply that you’re standing on the precipice aren’t quite sure which way to jump.  

The good news?

Wherever your head (or operation) is at, the following primer can help you make an informed decision.  

Onshoring

On the most basic, surface level, onshoring—that is, moving overseas operations, whether material or service, back to the United States—is likely to come at a somewhat higher cost. After all, you presumably moved or are planning move a facet of your business overseas for a reason—and that reason is typically tied to the bottom line. But now you are reconsidering. And as you do, it’s important to remember that proximity carries very real benefits as well, including a greater ability to finetune processes, manage assets, and maintain workforce accountability.  

No “out of sight, out of mind” vibes to worry about here.  

Place those considerations alongside any savings you may glean from, say, eliminating transport and/or tariff fee—and even with potential increased labor and/or production costs the move might still quickly become a whole lot more attractive to your bottom-line.

Also worth noting: The label “made in the USA” carries significant weight with the buying public. A 2020 survey by the Reshoring institute found nearly 70 percent of respondents would prefer American-made products and more than 80 percent indicated they “would pay up to 20 percent more for products made domestically.”

Offshoring

As your manufacturing business grows, offshoring—as noted above—can reduce costs or, just as importantly, allow you to utilize an existing production line without starting from scratch. If substantial enough, those savings can give you a real leg up in your quest to stay competitive and place your business on a growth trajectory.  

Yet, while global manufacturing and transport is well-established, there are many macro factors to consider as you search for a location. The include—but are certainly not limited to—custom duties, excise taxes, and fees; degree of access to ports and shipping lanes; typical seasonal delays, if any; and how currently “in vogue” a location is with other manufacturers, both inside and out of your business space.  

This last point is essential because you do not want to be competing with others for resources and attention—now or even two, three, or five years down the road. Better perhaps to strike a balance with a country that has both the infrastructure you need but also is up-and-coming enough to still offer attractive incentives like lower tariffs and fees. You can, of course, split the difference as well: You might find, for example, that electronics and high-precision casts are well suited to China or India, whereas other components may be made more effectively and cheaper in a different offshoring location.

At this point, networking with peers and industry professionals can be invaluable. You don’t know what you don’t know until either someone who has been there tells you or you find out on your own. And when you’re talking business and margins, the former is almost always better than the latter.  

Should You Stay or Should You Go?

The calculus in answering this question will naturally be different for every business. The key is to approach your own deliberations in a comprehensive manner, considering the various idiosyncrasies and layers of your own product(s), needs, and goals.  

As you weigh your options remember that a small business loan or business line of credit can be a great way to finance the evolution of your enterprise and set yourself up for future growth and success. Idea Financial, for example, offers a quick application and approval process for up to $250,000 in funds—allowing you to act quickly as you look to take you small business to the next level.  

Click here to find out more about Idea’s fast and flexible business financing. Be sure to also visit our Business Resource Center for more helpful articles on every aspect of your business journey.  

 

Idea Financial
October 2, 2021

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