March 26, 2012 2 Comments
Eric Markowitz | Inc.com staff
Mismanaged supply chain decisions sent manufacturing overseas. But the industry has changed direction.
When Anton Bakker launched his company, Offsite Networks, in 1999, he had no intention of manufacturing overseas. But a few years later, when his company began taking on larger orders, he began looking for cheaper supply alternatives.
That’s when he went to China.
By the early 2000s, Chinese contract manufacturers had become increasingly equipped to handle the type of advanced manufacturing that Offsite was producing—point-of-sale hardware for store loyalty programs, like high-tech printers and scanners. So in 2004, the company, which is based in Norfolk, Virgnia, canceled contracts with domestic suppliers and moved 90 percent of its manufacturing to suppliers based in China, Malaysia, and Tokyo. For the most part, Bakker was satisfied.
“The scale drove us to look for more competitive, cost-effective products,” Bakker says. “I had a difficult time doing that domestically. We found that the products were just not competitive in terms of pricing, and we could find them at less than half the price overseas.”
That narrative—of outsourcing, offshoring, and finding cheaper suppliers overseas—is not a new story.
But then something unexpected happened. In 2011, Offsite Networks moved their manufacturing back to America, finding a domestic supplier, Zentech Manufacturing, based in Baltimore, to carry out the company’s orders.
- See the slideshow: 6 Companies That Came Home
So what changed?
Bakker tells me the company returned for a variety of reasons. It was becoming more affordable to manufacture locally, he says, and American technology had improved rapidly. This meant that labor costs, which had initially driven Bakker to find cheap work overseas, were a smaller percentage of total costs. Meanwhile, an increase in other costs—like shipping, for instance—had increased. In other words, it was cheaper to manufacture locally.