Understanding Reshoring

The term reshoring is simply used to explain the process of returning domestic product manufacturing from a foreign country back to the home country of where the business’s products are sold. To get a stronger grasp on reshoring, it is important to first start with understanding the difference between shoring and sourcing. For in depth examples of companies that have done this and the reasons why they reshore, you may want to read our Reshoring Expert Case Studies. Or, take a look at what the Benefits of Reshoring are.

Offshoring vs Outsourcing

Offshoring is the act of moving business operations from a company’s home country to a new one. The term ‘offshoring’ became popular primarily because of the movement of manufacturing from the US overseas to China. The implication is that the long distances considered for these endeavors is common and will bring the production off of one shore and onto another. According to Dian Schaffhauser of SourcingMag.com, “offshoring simply means having the the outsourced business functions done in another country… and is frequently done to reduce labor expenses.”

So, what exactly is outsourcing? Out sourcing does not have a location-based focus like offshoring. It is simply the process of moving an operation that was done in-house to another company as a subcontractor. According to MicroSourcing.com, “Outsourcing is commonly defined as the transfer of the management and/or day-to-day execution of a business process to an external service provider.” So, offshoring adds the element of location to the outsourcing of a process to an external company.

Nearshoring vs Nearsourcing

Similar to offshoring and outsourcing, the terms nearshoring and nearsourcing are also dependent upon the variable of country location. The difference here is that, for nearshoring, the location of the country where the services are provided is closer to the country where the product is sold. As ProcessFlows.co put it, “Nearshoring means that an organisation has transferred work to another organisation within its own region.” So, the emphasis is on keeping the business function in the same geographic region as the business, but not the same country. An example of this would be a US company that decides to have their product manufactured in Mexico instead of China.

Nearsourcing, on the other hand, is a strategy to make a supply chain more lean by allowing the products to be manufactured by another company outside of the parent organization while focus on the proximity. As wiseGEEK describes it, “Near-sourcing is a term used to describe a business strategically placing some of all of its operations close to where its end-products are sold.” The assumption is that if someone uses the term nearsourcing, they are talking about a domestic outsourcing decision based on distance from the company headquarters or where the product is sold. However, you may hear the compound term offshore nearsourcing, which basically means nearshoring.

Insourcing vs Reshoring

What is reshoring compared to insourcing? You guessed it, the main difference is the geographic location of the production and whether it is specified. Reshoring is the more practical term for US companies looking to consider inshoring or onshoring. As the name eludes to, reshoring builds in the assumption that a company’s manufacturing was already taking place overseas and they are considering a move back to the home country – something very common in the US.

Insourcing is simply the process of completing business functions, like manufacturing, within the organization that sells the product. There is no specificity in terms of location because the location will be the same as that parent organization. Resourcing is an accurately used term if applied to bringing the outside production back in house.

Hopefully you can now confidently answer the question, “What is Reshoring?” and understand why can sometimes be difficult for others to understand. Reshoring is the relocation of production back to the country where the company is headquartered or where their product is sold from an outsourced overseas manufacturer. To learn more, we recommend visiting our Reshoring Research page.