Reshoring, Nearshoring, and Insourcing Ease Supply Chain Issues for Small Business Owners
In our most recent quarterly Insight Report, the BizBuySell team surveyed business owners and brokers on a variety of topics facing the small business industry. While supply chain issues appear to be easing, they remain top of mind. 44% of business owners see an improvement in supply chain issues, although it appears to be a cautious optimism for 2023, as many small business owners recognize a potential for industry-specific disruptions. With the pandemic’s impact on the shipping industry and rising inflation’s effect on transportation costs, many companies are looking for answers closer to home. Enter the current reshoring, nearshoring, and insourcing trend. Growing in popularity, this trend is sure to alleviate supply chain issues in the future.
Reshoring
Reshoring is the process of bringing manufacturing operations back to the United States from overseas. Saving on transportation costs, reducing lead times, and benefitting from a skilled workforce familiar with American standards are just a few of the benefits of reshoring. The Reshoring Initiative® reports that manufacturing jobs are projected to break records for 2022. Bringing manufacturing operations back to the U.S. helped to create 350,000 new jobs last year.
The movement to reshore business operations will continue to gain momentum with the passing of the Inflation Reduction Act and CHIPs Act, which offers incentives for products made and sourced in the U.S. Increasingly, consumers are interested in where their products are made with 72% specifically looking for products made in the USA. In fact, almost half of consumers are willing to pay a little more for a “Made in America” label. Reshoring appears to be a formidable answer to the risks the supply chain has revealed over the last few years.
Nearshoring
Similar to reshoring, nearshoring has the potential to benefit both small businesses and the American economy. Among the benefits of bringing business operations to a nearby country are lower costs and greater efficiency. Geographic proximity improves communication with fewer time zone and cultural differences in addition to achieving a quicker speed to market and increased control of operations.
The supply chain disruption manufacturers recently experienced has led many companies to look to Mexico as an alternative to China for sourcing and production. According to the U.S. Census Bureau, Mexico exported $324 billion worth of goods to the U.S. in 2022, up nearly 18% from the previous year. Bringing manufacturing closer to home gives small business owners a renewed confidence for continuing improvement in supply chain issues.
Insourcing
In addition to reshoring and nearshoring options, insourcing is another trend alleviating supply chain disruptions. Insourcing occurs when companies use their resources to bring processes and procedures in house that were previously outsourced. While higher wages have previously been a roadblock, the ability to maintain quality control, save on shipping costs, and maintain self-reliance has helped to mitigate supply chain issues for small business owners. A bonus to bringing operations in house is that it has the potential to increase value for U.S. manufacturing businesses. Investing in insourcing creates a self-reliant operation with a highly sought after skilled labor force and modern technology and production equipment. Insourcing allows businesses to have more control over the process and lessens the risk of supply chain disruptions.
Supply chain resiliency is essential for small businesses and has companies increasingly looking for solutions. Predictable supply chains have the potential to have a significant impact on economic growth and job creation. Reshoring, nearshoring, and insourcing are gaining traction and are effective and efficient supply chain strategies to consider for 2023.