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Reshoring, Offshoring and Relocation of Operations

Reshoring, Offshoring, and Relocation of Operations

What is the difference between Reshoring and Offshoring?

Reshoring is the process of returning the production and manufacturing of goods back to the company’s original country or simply „back home“. Reshoring is also known as onshoring, inshoring, or backshoring. With the war in Ukraine, Sanctions, and COVID19 logistic challenges, reshoring has become one of the most discussed topics in the board rooms nowadays.

It is the opposite of offshoring, which is the process of manufacturing goods overseas to try to reduce the cost of labor and manufacturing. Although the trigger is similar, mainly the need to optimize costs, 

In other words, if a company has moved some or all of its production operations overseas (offshoring) to reduce manufacturing costs, reshoring is the process of bringing some or all of it back.

Reshoring and offshoring don’t always have positive results, where a company underestimates the costs and the logistical planning involved.

 

Why do companies Offshore ?

COSTS

Businesses are constantly seeking different ways on how to gain a stable source of revenue while at the same time sustain their day-to-day operations to stay competitive or even survive. However, due to the unpredictable and excessive fluctuations in the economy, most companies cannot merely maintain the cost of local activities and that is why they turn to offshoring as a viable strategy.  Through reducing overhead costs, businesses can redirect their resources to allow their local workforce to focus more on their core competencies, and to prioritise revenue generating tasks.

SKILLS SHORTAGE

The declining number of available job opportunities in different countries is one of the main reasons why most people disagree with companies offshoring their business operations. However, despite this situation, various industries are also struggling with how to overcome the rising number of skill shortage or by the lack of qualified staff to do the job. Through offshoring, companies discovered that they could hire a team of highly qualified staff in low-cost countries who are ready to take on tasks that are frequently rejected by local employees.

RESTRICTIVE REGULATIONS

Companies have to deal with are restrictive local regulations that hinder them from reaching long term business goals. Staying updated with local laws is vital for any business to operate continuously, but these regulations unintentionally cause added costs on operational expenses that later on leads to reducing competitiveness.

STAYING COMPETITIVE

In this interconnected world, businesses are now competing in a global stage wherein innovation is becoming a significant factor in determining the success of a company, and the constant demand for efficient customer service makes it more challenging for companies across different industries to stay relevant. 

Why do companies Reshore ?

INCREASING COSTS

As countries around the world, especially in CEE and Asia, continue to develop, labor costs are increasing and shipping costs are becoming prohibitive. For some businesses, the cost difference between operating onshore or offshore is negligible, with the gap growing smaller every year.

INSTABILITY, SANCTIONS, BANS

The geopolitical and pandemic situation has changed dramatically over the past ….two weeks, and over the past decade in general. War in Ukraine, Brexit, Sanctions, COVID 19 measures, Lockdowns. All of these factors drive companies to reshore their operations „back home“.

SUPPLY CHAIN MANAGEMENT

Reshoring means that most links in the supply chain will be in the same time zone, making them easier to manage and creating leaner workflows.

The logistic costs skyrocketed during COVID already, and the next rise due to the war is keeping many CEOs sleepless.

Also, the recent blocking of the Suez made the risks more and more visible.

REGULATORY FACTORS

Conforming to material standards, quality control issues, and losing intellectual rights when working overseas can create problems for companies. Reshoring operations means that everything comes under one set of regulations.

RISK MITIGATION

Reshoring can help protect supply chains from the inevitability of highly disruptive black-swan events that could result in significant production delays.

How can EIM support you in Reshoring, or Offshoring

As of today, we are running several projects in „both“ directions Offshoring and Reshoring in the CEE Region. Having access to our global pool of interim managers, but also a solid track record of projects with local managers from Poland, Czech Republic, Hungary, Slovakia, Romania, Bulgaria, Slovenia or Croatia, EIM is well positioned to provide you with the right solution. Recently we already started the following projects:

RESHORING

  • Relocation of operations from India, Complete build-up of operations in the CEE Region, 12+months
  • Relocation of manufacturing from Vietnam to CEE Region, 12+ months

OFFSHORING

  • Relocation of production from Germany to Poland (500FTE), 6-9 months
  • Relocation of distribution center from Germany to the Czech Republic (1.500FTE), 6 months
  • Relocation (Greenfield) of automotive supplier from UK to Poland (1.100FTE), 9-12 months

 

Which are the characteristics of EIM Interim Managers suitable for Relocations?

INTERIM PLANT MANAGER

INTERIM CEO, COO

INTERIM SUPPLY CHAIN MANAGER

INTERIM LOGISTICS MANAGER

INTERIM HUMAN RESOURCES MANAGER

INTERIM PROJECT MANAGER

– Solid experience in Project Management
– Track record of working in a multicultural environment, able to communicate in several languages
– Sector experience based on the field of operations (automotive, e-commerce, pharma, healtcare, retail)
– 5+ realized international projects in the past (downsizing, scaling-up, closure, greenfield)
– 10+ years of experience in leadership of mid-sezed/ big organization
– Clear track record in the function (supply chain, logistics, operations, HR)
– Understanding of the „local“ market, history, culture and management style

 

Interested in doing business in the CEE Region?
Check our dedicated pages for Romania and Bulgaria.

Let’s discuss the opportunities together

Bohuslav Lipovsky, Managing Partner
EIM Executive Interim Management CEE
Together we can find the solution you are looking for

About Bohuslav

Bohuslav leads companies and their managers through complex changes resulting from crisis, restructuring or post-merger integration. He focuses on working with private equity firms and international corporations. His strength lies in developing a transformation strategy and leading of multi-cultural teams.

Bohuslav has international experience, he has been active in interim management for several years, speaks several languages, and has extensive experience from numerous projects.