Five Strategies for Cutting Reshoring/ Nearshoring Costs via Data Automation
Real-time updates and a 360° view of all scheduled jobs across all shop floors can help plastics processors gain greater visibility and control over operations. Photo Credit: DELMIAWorks For decades, many manufacturers relied on plastics processing operations in Asia, most notably China, to take advantage of low wages and cheap real estate. However, supply chain uncertainty, long lead times, tariffs and rising costs have eroded the advantages of offshoring in the region. As a result, the plastics industry has seen a strong move toward reshoring and nearshoring in North America, Latin America and the Caribbean. In fact, the Manufacturers Association for Plastics Processors ( MAPP ) noted in its “State of the Plastics Industry Report 2023” that 54% of plastics processors see their customers reshoring — the highest percentage in 18 years. The move toward reshoring and nearshoring presents plastics manufacturers with the opportunity to compete on the basis of high quality, easier collaboration, and faster delivery, among other benefits. Moreover, automation of data collection and interpretation now makes it possible to offset the costs associated with higher local wages. Let’s look at the main drivers that are leading to reshoring and nearshoring in the plastics industry, along with five ways that plastics processors can employ automation to compete effectively while maintaining margins. Plastics Industry Reshoring and Nearshoring Drivers According to the MAPP “State of the Plastics Industry Report 2023,” more than one-third of plastics processors surveyed reported that they gained business from foreign competition. This indicator of a continued move toward reshoring aligns with findings by the “ Reshoring Initiative 2022 Data Report ” that more than 364,000 manufacturing jobs were announced in the United States last year. A 53% increase over 2021, these gains were due to reshoring and foreign direct investment. Both reshoring and nearshoring can provide several strategic benefits, including the ability to alleviate geopolitical risks and the high costs of tariffs; improve quality control; and gain greater agility to respond to changing customer and market demands. For many plastics processors, two factors serve as the primary motivators for reshoring and nearshoring: proximity to customers and the advantage of a regional resin supply. Proximity to Customers Among U.S. manufacturers, 62% have begun shifting from suppliers in Asia to suppliers based in closer-proximity markets to reduce transportation costs and improve time-to-market, according to Deloitte’s report , “The Future of Freight: Transforming the Movement of Goods.” For many plastics processors, the ability to relocate production closer to customers also makes it easier to communicate and collaborate with them and customize solutions to their needs, boosting customer satisfaction. Additionally, by having better visibility into customers’ future orders and their forecasts in real time, these manufacturers are able to build greater resilience into their supply chain. Regional Resin Advantage Within the plastics industry, a compelling factor in reshoring and nearshoring is the availability of resins according to Shale Crescent USA in its report , “Global Economic Factors Align Favoring U.S. Plastic Product Manufacturing Over China-Based Operations.” The report observes that Ohio, West Virginia and Pennsylvania combined produce one-and-a-half times more natural gas than China — a huge advantages in a key plastics feedstock. By contrast, China either imports plastic resin or produces resin from more expensive Naphtha based on crude oil. Additionally, the report notes that the distance between U.S. resin providers and North American processors is often less 2000 miles. By comparison, the roundtrip to get resin or feedstock to China and then receive finished products in return is roughly 25,000 miles. That translates into a potential 30-day supply chain process for North American plastics processors. Collectively the benefits of a regional resin supply include the ability to lower prices, reduce delivery times, decrease the working capital required, and enable greater feedstock flexibility. At the same time, the elimination of transcontinental supply chains enables plastics processors in North America to significantly cut their carbon footprint and support the sustainability initiatives of their organizations, customers and supply partners. Five Ways to Reduce Costs Using Data Automation Even as plastics manufacturers find ways to cut the costs of nearshoring and reshoring through regional resin supplies and lower transportation costs, they continue to face higher wages, particularly for skilled workers. Among plastics processors surveyed for the MAPP “State of the Plastics Industry Report 2023,” 55% stated that operator wages increased in Q4 2022, and for 3% of respondents, those increases were significant. Increasingly, these manufacturers are automating processes to reduce labor costs while increasing shop floor productivity and providing greater visibility […]
