In the 1990s, offshoring became a widespread practice among manufacturing companies. Businesses sought to locate their production facilities abroad to capitalise on cheaper labour costs and attractive government incentives. Countries such as China and India emerged as major hubs for manufacturing due to their vast workforces and supportive economic policies.
However, as global conditions continue to evolve, offshoring is no longer the panacea it once was. A growing number of companies are recognising the benefits of bringing their manufacturing operations back to the UK, embracing a trend known as onshoring. One prominent company enjoying the benefits of UK manufacturing is Walkers Crisps, whose parent company, PepsiCo, has invested over £120 million in the UK supply chain since 2020, "positioning Walkers for further growth in the long term."
But why is offshoring becoming less than ideal, and what are the benefits of bringing production “back home”?
Offshoring – losing its shine?
- Rising labour costs
Wages in many traditional offshoring destinations have been on the rise. In countries like China, average wages have increased significantly, reducing the cost advantage that once made offshoring so appealing. This has led many companies to reassess the financial viability of maintaining overseas operations.
- Supply chain vulnerabilities
The COVID-19 pandemic exposed the fragility of global supply chains, highlighting the risks associated with relying on distant manufacturing hubs. Disruptions due to lockdowns, transportation bottlenecks, and geopolitical tensions have underscored the importance of having a locally-based supply chain.
- Quality control
Quality control issues and production errors often arise when there is a lack of direct oversight and communication barriers. Onshoring allows companies to have more control over their manufacturing processes, ensuring higher standards of quality and customer satisfaction.
- Environmental concerns
Offshoring can contribute to a larger carbon footprint due to long-distance transportation and less stringent environmental regulations in some countries. Onshoring aligns with the growing emphasis on eco-friendly practices by reducing transportation emissions and enabling companies to adhere to stricter environmental standards.
Futures on UK soil
All of these push factors are leading to 58 per cent of UK manufacturers moving operations back to their home country, citing key benefits including high quality products (33 per cent) and the ability to have the products they want faster (34 per cent). Local manufacturing allows for closer collaboration between production teams, suppliers, and customers, meaning that companies can better understand and respond to customer preferences and market trends.
Onshoring also strengthens supply chain resilience by reducing dependence on international suppliers and mitigates the risks associated with global disruptions. Companies can more easily maintain transparency in their operations, uphold labour rights, and ensure compliance with health and safety regulations. Therefore, onshoring aligns with the growing demand for ethical business practices and social responsibility.
The trend towards onshoring represents a significant shift in the manufacturing landscape, driven by the need for stability, quality, and sustainability. By prioritising local manufacturing, businesses can enhance their resilience, improve quality control, and contribute to economic growth and job creation.
But onshoring isn’t the only option to achieve these goals. Read ‘Your guide to a simplified supply chain’, our new resource, which explores not only onshoring but friendshoring and nearshoring.
Want to learn more about onshoring? Or is friendshoring or nearshoring better for your business needs?
