Is Shifting Your Manufacturing Elsewhere a Viable Option?

If your company is paralyzed by the uncertainty of the global trade war, you’re not alone. Hundreds of businesses are affected and impacted. Planning requires strategic thinking, risk assessment and flexibility. Your focus shifts from avoiding tariffs to minimizing overall exposure, improving operational efficiency and strengthening resilience.

The decision that many companies face is whether they should shift their current manufacturing to other regions, reshore it or continue with status quo. Deciding which path to take—and whether a solution will yield short- or long-term benefits—can be especially difficult in times of uncertainty.

Purchasing managers and supply chain leaders are busy recalculating the impact of tariffs on input costs, recalibrating based on various scenarios and looking for other cost-effective options that yield the best long-term benefit for their company.

Developing a set of criteria that can be applied across the various scenarios can help you assess the feasibility and decide on an option that would yield the best result in the short and long term.

Total Landed Cost Analysis

Landed costs include product cost (FOB or EXW price), shipping and freight charges, import duties and tariffs, customs fees and brokerage services, insurance, handling and inland transportation, warehousing, logistics and other taxes. When considering a nearshoring option, one must consider the impact this change could have on the total landed cost including currency exchange volatility and whether the cost savings outweigh relocation risks and the required investment.

Labor Availability

If you move your manufacturing to another region, consider the full labor cost including the impact of labor laws and the availability of skilled labor. Rigid labor policies, such as minimum wage laws, will increase costs and risks, while a lack of available skilled labor will impact your scalability and quality control effort.

Lead Times

Another factor to assess is the lead time. Compare how well your current global supply chain and manufacturing set up responds to changing demands. Does a different location offer faster delivery, fewer port bottlenecks, or more efficient last-mile logistics and what are the cost implications of this change?

Manufacturing Ecosystem and Supplier Base

When evaluating a shift in manufacturing location, consider whether the new region has a robust ecosystem and supplier base. Does it have a sufficient pool of skilled labor specifically in your industry, access to relatable component suppliers, availability of engineering partners and technical experts, well-established logistics and distribution channels and certification bodies for quality control. A well-supported manufacturing and supplier base in a region will minimize logistics costs and make a transition more feasible in the long term.

Supply Chain Resilience

Assess the supply chain resilience and its vulnerability to being disrupted by factors such as geopolitical tensions, pandemics and natural disasters. Consider multi-sourcing or regional diversification to reduce over-reliance on one single country. The more diverse your supplier base across various regions, the more resilient you will be from short term disruptions.

Capital Investment Requirements

If you are not in the fortunate position of having the capital to invest in a new facility or move an existing one in response to the volatility, you will want to consider what set up costs are involved. Do you have the cash runway to financially and operationally support this move or new build for the next 6 – 18 months of transition.

Customer and Market Proximity

When considering a new partnership, a new build or a relocation of an existing facility, consider the proximity to your customers and end markets. The distance between your production facilities and customer markets will impact your shipping costs. Consider whether this move aligns with a “buy local” customer preference as well.


Strategic Partnerships or Alliances

If capital is not accessible for a relocation or a new build, a more affordable and viable solution is to build new partnerships and joint ventures with companies in lower-risk regions. It is a more risk averse option in the short term.

Evaluation Matrix

Consider using a decision tool like a table with weighted % based on how high priority these factors play in your decision to relocate your manufacturing. Below is an example of a decision matrix that can be used to score on a scale from 1 to 5 or 1 to 10 based on level of importance.

Download your Evaluation Matrix for Relocation Consideration

Electronics Industry Consideration

Specific to the electronics industry, you can consider a matrix that evaluates manufacturing of components such as PCBA assemblies, HVAC control boards and wire harnesses in China, Mexico, Vietnam, India, Canada vs the United States.

Download your Market Comparison Guide

A Partnership Option

Avnan is a partner that can offer flexibility in manufacturing allowing you to access many markets around the world. There are strategies we can offer to help you mitigate risk, reduce costs, and strengthen operational resilience during economic uncertainty. Contact us to explore how we can support you in navigating today’s challenging landscape.

Final Thoughts

In considering a move from your existing network and ecosystem, consider the cost implications on total landed cost, tariff exposure, labor cost and availability, lead times to North America, supply chain resilience, political stability, market proximity, compliance and regulations. In addition, factor in the lead time in making the transition and its associated opportunity cost as well as the additional required investments to be fully operational and its potential return on investment.

With so much uncertainty now, it may be the best time to reassess your current setup, review all your options so that you can be well informed and prepare to make a move if that is the right direction.