Why Reshoring and Transportation Issues Go Hand In Hand
As you most likely know, transportation and logistics success is essential to a smooth manufacturing operation. Here at Distefano, we’re pretty lucky to have our own fleet, BMC Transportation. Week after week, our products are delivered using our company’s own dedicated fleet, BMC transportation. Since we have our own transportation division, our customers’ deliveries are a priority for the over 100 dedicated owner/operators in the United States, and your deliveries will arrive with reliability: always.
However, many manufacturers simply aren’t that lucky. And, as more and more movements to bring “advanced manufacturing” back to the United States resurface (read more about that here), FleetOwner notes that transportation will be greatly affected by these reshoring efforts. “One of my favorite topics is the reshoring of manufacturing back to the U.S. as there are many transportation and logistics effects associated with that,” noted John Larkin, managing director and head of transportation capital markets research at Stifel Capital Markets, during a conference call with reporters last week.
Why is this the case? Well, reshored advanced manufacturing happens for a few reasons. First, manufacturers are growing to realize that it may actually be less expensive to manufacture product in the United States. According to Distefano Vice President Brian Turner, “The cost of transporting products has come up, so as a manufacturer, we’d rather look at automation to lower our cost of operation. For example, the welding robot has been very significant in bringing our cost of operation down. This means that there really is no difference between the price of our delivered product and the Chinese price.”
As reshoring aims to bring production as close the consumer as possible, Rosemary Coates, executive director of the Reshoring Institute, notes that we’ll likely see more regional and even localized distributions centers, meaning that infrastructure could indeed develop to reflect this pattern.
With a more localized transportation pattern, rather than drivers spanning the country, the transportation network could shrink, and therefore be less affected by disruptions like the weather or port work stoppages. Additionally, benefits like drivers being at home more often could alleviate some of the problems drivers traditionally face, such as being away from home for long periods of time or not sleeping enough.
“And think about supply chain risks: strikes, natural disasters, geopolitical issues, and oil price fluctuations causing fluctuations in logistics costs,” she pointed out. “However, crumbling [transportation] infrastructure could be a problem, so that has to be addressed.”
There are other aspects of logistics that could be affected by a U.S. manufacturing renaissance, according to Bob McCutcheon, U.S. Industrial Products Leader for PricewaterhouseCoopers. However, the transportation solutions will be more beneficial for some industries rather than others. McCutcheon did the numbers, and found that costs seem to indicate good news for the chemicals, primary metals, and heavy equipment manufacturing industries, who will benefit most from relocating their production to the United States, therefore decreasing production and transportation costs. On the other hand, these benefits aren’t quite as clear for the wood, plastic, and rubber products companies.
Something every expert can agree on, though, is that reshoring is nowhere near as all-encompassing and economy-changing as offshoring was. Although it’s made the news on just about every manufacturing blog there is, the reality is that reshoring is happening very, very slowly. The transportation and logistics issues that come as a component of reshoring will not require drastic changes in infrastructure, possibly for a very long time.
“The decision to reshore happens one company at a time,” Coates stressed. “It’s a slow yet steady process that will allow time for the building of the required logistics and transportation supply. There’s a lot of benefit there as it will provide more security and control over transportation, faster turnaround times, and ultimately less cost.”
Questions? Comments? Want to learn more about how reshoring affects global transportation and logistics? Leave a comment in the section below!