Why Onshoring Is on the Rise And Why It’s Riskier Than It Looks
Economic pressures and shifting trade dynamics are among the reasons US firms might consider onshoring or reshoring operations. But while the strategic rationale can be compelling, business leaders must understand the full scope of the operational realities before finalizing the relocation plans.
Supply chain disruptions represent a common blind spot in onshoring feasibility assessments and may pose significant risk for companies moving operations back to the US. Beginning with some of the most common challenges listed below, your project team should identify, explore, and assess supply chain risks to help build a successful onshoring strategy.
Supplier Networks: A Fragile Foundation for Onshoring Projects
Supplier network fragmentation is a primary challenge when onshoring operations. Depending on the material or service, the supplier ecosystem in the US may be immature, underdeveloped, overwhelmed, or ancient. Finding qualified suppliers and securing sufficient bandwidth from them can be costly and may not deliver the necessary supply levels in the timeframe needed. If your organization maintained some level of ongoing operations in the US, you may be able to expand your existing supplier contracts to accelerate reshoring, but it’s highly dependent on your network’s capabilities. Your business may need to focus on rebuilding dormant relationships or establishing new ones, which is often a time-consuming process.
Transportation Infrastructure and Logistics: Volatility Hides in the Details
Unstable transportation costs can undermine even highly skilled revenue forecasting and logistics planning efforts. Relocating operations to the US will almost certainly introduce new logistics providers while eliminating others. Depending on the region, your organization may have had access to specific transportation methods and networks that don’t have a direct US equivalent and your previous cost optimization efforts might not transfer cleanly to the domestic market. Everything from transportation pricing to packaging requirements to material delivery windows must be reevaluated. Even the ability to obtain fixed-cost pricing for contracts, a popular option that reduces budget surprises, may be more difficult or require a ground-up rethink before your onshoring project can move forward.
Compliance: Regulatory Complexity That Can Stall Execution
Compliance mandates could upend your existing processes and specifications, creating significant time and cost hurdles in your reshoring plans. Regulatory frameworks frequently influence a huge array of operational elements, and this variety is just one piece of the compliance puzzle your business must fit together when moving operations to the US. You may need to adjust your supply chain management processes to align with stateside compliance requirements. Raw material composition is sometimes mandated, which could require significant revisions to your supplier selections and product specifications. Acceptable supply origins and even sellers may be spelled out in regulatory rules. You may need to add in-house or outside expertise to help navigate these nuances, adding to both the cost and time needed to relocate your operations.
Material Availability and Cost Volatility: Procurement Gets a New Playbook
Supply and material availability can catchorganizations off guard and lead to additional costs, timeline challenges, and complex procurement issues. For example, you may be able to obtain the same materials post-move, but those cross-border transactions may incur new costs that didn’t appear in your previous spending forecasts. Some supplies used in overseas operations may be restricted from moving out of that region, and others might be prohibited from entering the US. Savvy overseas manufacturers know when their products have little competition in the US market and they sometimes charge more as a result. Geopolitical instability, trade policy changes, and currency fluctuations can also introduce costs that didn’t affect your business before and, in some cases, may be extremely difficult to forecast or control. Some materials may be more challenging to store, reducing the effectiveness and viability of earlier strategies focused on building strategic stockpiles. Long-term purchase agreements might also be less common or unavailable for US operations, further complicating price negotiation efforts.
Reshoring Risk Is Operational and Strategic
Ignoring supply chain complexity can derail your entire onshoring initiative. Without a clear understanding of the domestic supplier landscape, logistics capacity, regulatory frameworks, and procurement vulnerabilities, your relocation strategy may be built on fragile assumptions.
Onshoring your operations can reduce risk and enhance control, but only if you account for hidden challenges. Supplier network gaps, unstable logistics, compliance mandates, and raw material constraints must be assessed early. Project leaders should treat supply chain planning as a strategic pillar, not an afterthought.
FAQ: Onshoring Supply Chain Challenges
What is the biggest supply chain risk when onshoring operations?
Fragmented or immature domestic supplier networks often pose the greatest risk, especially for businesses accustomed to large-scale overseas ecosystems.
How do U.S. transportation networks affect onshoring projects?
Domestic logistics may involve different routes, pricing models, and capacity constraints, requiring a redesign of your transportation strategy.
Can compliance regulations delay reshoring?
Yes. Regulatory hurdles around material sourcing, safety standards, and environmental compliance can introduce significant delays and added costs.
Are all materials available in the U.S. for reshored operations?
Not always. Some materials may be restricted, more expensive, or only available through limited suppliers, complicating procurement strategies.
How should businesses prepare for supply chain risks during onshoring?
Conduct a full feasibility audit that includes supplier assessments, logistics mapping, compliance reviews, and procurement simulations.
