The Rise of Reshoring: How Western Manufacturers are Returning to Their Roots

May 16, 2024

For as long as most of us can remember, whether we were buying phone accessories, socks, or even souvenirs of very British landmarks, chances are they were made in China. With Western companies being offered generous incentives to relocate their manufacturing here – and other countries where workforces can be hired cheaply – ‘offshoring’ became a major economic strategy businesses across Europe and America happily pursued.

But as cost-effective as the production lines may be, offshoring in China comes with a significant drawback: it involves a long supply chain from China to Europe and the US. And while Western companies have lived comfortably with that drawback for years, seismic events over the last decade including Brexit, COVID and the Suez Canal blockage to name a few have presented challenges for those manufacturing in China.

Reshoring, where companies halt their manufacturing overseas and relocate production to their home country, is a strategy that manufacturers in the UK, Europe and America are increasingly adopting.

In this article, we’ll examine:

The reshoring trend
The reasons for its rise in popularity
The role that Amazon has played
How 4PL solutions are helping UK companies to reshore effectively

Reshoring on the Rise

Recent data from Manufacturing & Logistics IT reveals a significant surge in reshoring activities among manufacturers worldwide. In the UK, in particular, a remarkable 58% of manufacturers have initiated some form of reshoring initiative, signalling a fundamental shift in the supply chain strategy of British companies.

Despite domestic obstacles such as high interest rates and wage pressures, reshoring has yielded favourable outcomes for a vast majority of the UK manufacturers that have pursued it, with 90% reporting successful results. Among the key benefits cited are enhanced value, heightened security and cost reductions – advantages largely attributed to technological advancements in manufacturing and logistics processes.

With 82% of UK manufacturers intending to accelerate reshoring efforts within the next two years, the quest for more responsive and secure supply chains is gaining momentum on a daily basis. Granted, there are some concerns around talent availability and operational expenses. However, tech advancements are delivering levels of supply chain efficiency and agility that are simply too hard to resist. Some of these new tools include:

AI-driven tracking platforms
Digitalisation in factories
Data analytics for risk management.

Further incentivising manufacturers is a rapid return on investment, particularly in automation within supply chains. So it’s plain to see why reshoring is quickly becoming the number one hit in the global economic charts.

Nearshoring and friendshoring

Beyond outright reshoring practices, trends such as nearshoring and friendshoring have also gained popularity in the manufacturing sector. Nearshoring, where product operations are relocated to countries in close geographic proximity to the home market, allows for faster deliveries and greater operational flexibility.

UK fashion and cosmetic retailer, ASOS, for example, recently intensified its nearshoring efforts in response to the ongoing shipping disruptions in the Red Sea and Suez Canal. By sourcing products more extensively from countries like Turkey and Morocco, as well as from the UK, the company avoids its ships having to reroute when travelling from Asia – which previously led to longer lead times and increased costs.

While nearshoring may primarily offer geographical advantages, friendshoring is a growing trade practice where supply chain networks are focused on countries regarded as political and economic allies. Apple, for instance, have always produced iPhones in China. The U.S.-China trade war has meant that Apple has been increasingly pushing its suppliers to shift its supply chain outside of China.

Irrespective of China’s tacit support for Russia’s military campaign in Ukraine, huge question marks still hang in the air about China’s intentions toward Taiwan. Any attack or invasion would undoubtedly result in widespread global sanctions against China, akin to those imposed on Russia. If sanctions against China are even a possibility, it makes sound strategic sense for American, European and UK manufacturers to friendshore their supply chains now and avoid any panic, should the worst happen.

Additional complexities

Beyond geopolitical tensions, a number of other variables are playing an increasingly relevant role in the global supply chain equation. Wage inflation in offshore manufacturing hubs has significantly eroded the cost advantages traditionally associated with manufacturing in Asia. With automation and digitalisation allowing Western factories to streamline operations and reduce dependency on labour-intensive processes, they can now compete far more effectively in the global arena, lessening the traditional appeal of offshoring even further.

Keeping the customer happy

While customer satisfaction may not generate news headlines in the same way that global crises do, it’s one of the most fundamental driving forces behind the reshoring trend. With modern consumers demanding ever-more rapid product innovation, manufacturers are having to develop shorter production cycles and quicker time-to-market in order to stay competitive. China lies nearly 5,000 miles from the UK. With an average container ship taking the best part of a month to get here, it’s not exactly what you’d call a point-and-click solution.

Most importantly, though, customers now expect same or next-day delivery as a matter of course, along with more personalised shopping experiences and transparent pricing.

The Amazon Effect

There’s no denying how impressive Amazon’s sheer size is. But what’s really changed the manufacturing and supply chain arena is the impact the giant has had on customer expectations. Not so long ago, “please allow 28 days for delivery” was an industry-standard catchphrase that occasionally came with a single telephone number that customers could call – one that might even be answered if the customer was lucky.

Amazon didn’t just change all that – it completely re-educated the customer. Aside from rapid delivery, modern consumers also expect brands to understand their exact preferences, no matter how or where they may be adding goods to their carts. Here are some common things customers will expect companies to do:

Predict size, colour and style preferences
Know a customer’s preferred delivery method
Remember where they like their packages delivered to and
Be aware of how they like to receive updates about the current location of their goods.

Expectations regarding customer service have intensified accordingly, with 46% of customers expecting brands to respond to enquiries within four hours – and 58% also assuming brands will cover return shipping costs if they’re not happy. With its emphasis on speed, convenience and personalised shopping experiences, Amazon has set a very, very high bar for retailers and manufacturers alike. The company’s extensive investment in warehouses, automation and robotics has allowed it to offer swift deliveries, with its aggressive price-matching algorithm driving price transparency in any sector you care to name.

As manufacturers respond to these rapidly evolving consumer preferences, reshoring is less an option and more a strategic necessity. By bringing production closer to the point of consumption, manufacturers can reduce lead times, enhance agility and improve responsiveness to customer needs, keeping brands competitive in an increasingly customer-centric space.

4PL – Solving multiple problems with a single solution

In response to the above, manufacturers are increasingly turning to strategic logistics partners who specialise in Logistics, including 3PL and 4PL etc. to assist with developing the necessary supply chain infrastructure and transport solutions.

While reshoring offers a viable way to reduce the risks inherent in global supply chains, 4PL solutions offer an additional layer of risk mitigation, further reducing vulnerabilities. As a leading provider of 4PL solutions, X2 (UK) can oversee a manufacturer’s entire supply chain network. We integrate a wide range of logistics services, leveraging cutting-edge technologies and can assist with the development and implementation of reshoring activities.

The view from the top

At X2 (UK), we adopt a holistic top-down control tower approach to supply chain management that allows us to boost responsiveness and resilience across the entire network. By centralising data and communication channels, we facilitate real-time visibility and coordination, which helps us: