So You Think You Want to Reshore …. But Aren’t Sure Where to Start?
24 May, 2016By: Michelle Comerford
Global economics, consumer demand, innovation and technology are converging to make a great business case for bringing operations back to the U.S. -- otherwise known as reshoring.
Don’t misunderstand -- whether to reshore maintains a complex proposition. How will changes in the company’s footprint impact import/export duties? Is the U.S. supply chain robust enough to support the proposed operation? Are the required skills available in the U.S. or did they dissipate due to lack of demand when the industry offshored? Does company leadership have the capacity and will to manage the inevitable disruption to the status quo?
This complexity has made tools such as the Total Cost of Ownership (TCO) calculator from the Reshoring Initiative a vital part of the discussion, helping companies to compare the overall cost – including risk, quality, speed to market and safety – of doing business in the U.S. versus China and other countries. In many cases, the results are quite favorable to the U.S.
But once the decision is made to reshore, how can a company find the right location?
Step 1: Define the Operation and Requirements
First, define the proposed operation and the requirements against which location opportunities will be evaluated. For a manufacturing plant, the production process and equipment should be planned with a process engineer, recognizing that the U.S. version of the plant will likely be more highly automated than its foreign counterpart.
Define the plant inputs, including suppliers, transportation, labor, real estate, utilities and other location factors such as community preferences, accessibility and other operating factors. Calculate the project investment and identify the desired timeline to begin operations.
Keep in mind there will be a transition period as the new facility gets up and running; many companies initially bring in talent from overseas plants to train the new U.S. team.
Step 2: Plan Project Financing
Although there are financing programs and incentives available from most states and local communities, these programs rarely fund 100 percent of a project. You will need to provide at least a portion of the capital required, whether through internal means or outside investors. Having a firm understanding of any gap will be important to incentive discussions.
Step 3: Tap Site Selection Resources
There are many resources available to assist with site selection, most notably economic development agencies and site selection consultants.
Economic development agencies operate at the state, local and regional levels and have responsibility to attract and retain business investment and jobs to their respective communities. They can be excellent initial resources of preliminary information at no cost and are the point of entry for economic development incentives, such as grants, property tax abatement, corporate income tax reductions and training assistance. Reshoring projects will typically find a particularly warm welcome, as they resonate with the general public’s sense of patriotism.
A professional site selection consultant assists companies in formulating a site selection process and executing a strategy through data collection, analysis and field work. Most site selection consultants work closely with economic development agencies and utilize data services and other tools to evaluate available locations and incentives through an established methodology.
Step 4: Plan and Execute the Evaluation Process
An efficient site selection process is really more of a site elimination process. Location screening and scoring criteria, beginning with high-level considerations and then evolving into site-specific considerations, will guide you through a progressively shorter and shorter list of potential locations.
If your process is not deliberate, you will become mired in an overabundance of information and conflicting priorities; if not rigorous, your decision may not withstand the test of time and markets. If, however, you achieve both, you will find the optimal location and reap the financial and operational benefits.