Procurement Glossary
Reshoring: relocation of production back to the home country
November 19, 2025
Reshoring refers to the strategic relocation of production and procurement activities from abroad back to the home country or geographically closer regions. This development is becoming increasingly important in modern procurement, as companies want to make their supply chains more resilient and reduce dependencies on distant markets. Find out below what exactly reshoring means, what methods are available and how current trends are impacting procurement strategy.
Key Facts
- Reshoring reduces transportation costs and significantly shortens delivery times
- Geopolitical risks and trade barriers are driving relocation
- Quality control and compliance are simplified by geographical proximity
- Higher labor costs in the home country require careful cost-benefit analyses
- Sustainability and CO2 reduction are becoming important decision-making factors
Contents
Definition: Reshoring
Reshoring involves the systematic relocation of business processes, production or procurement back to the company's home country.
Core aspects of reshoring
Relocation is driven by various strategic considerations. Companies pursue several goals at the same time:
- Reduction of supply chain risks and dependencies
- Improving the ability to react to market changes
- Increased product quality through better control
- Strengthening the local economy and corporate image
Reshoring vs. nearshoring
While reshoring means the complete relocation back to the home country, nearshoring describes the relocation to geographically closer, but not necessarily domestic, regions. Both strategies aim to reduce distance and the associated risks.
Importance of reshoring in Procurement
For the procurement strategy, reshoring means a fundamental realignment of the supplier base. Market analysis must reassess local capacities and cost structures, while at the same time strengthening security of supply through shorter supply chains.
Methods and procedures
The successful implementation of reshoring requires structured analysis methods and a systematic approach to supplier evaluation.
Total cost of ownership analysis
A comprehensive cost analysis forms the basis of every reshoring decision. This includes not only the direct production costs, but also all hidden costs:
- Transportation costs and logistics expenses
- Quality assurance and rework costs
- Storage costs and capital commitment
- Risk premiums for currency and political risks
Supplier evaluation and development
The market analysis of local suppliers requires new evaluation criteria. Companies must identify domestic production capacities and evaluate their development potential. The ability to deliver is becoming a decisive factor here.
Step-by-step implementation
Reshoring is usually not a complete relocation, but a gradual process. Pilot projects with selected product lines make it possible to gather experience and minimize risks. The needs analysis helps to identify suitable candidates for reshoring.
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Important KPIs for reshoring
Measuring the success of reshoring initiatives requires specific key figures that take both financial and operational aspects into account.
Cost-based key figures
The total cost analysis is at the heart of measuring success. Important indicators include the development of the total cost of ownership, transportation cost savings and reduction of the capital commitment period. These metrics show the direct financial impact of the relocation.
Supply chain performance
Operational KPIs measure the improvement in supply chain performance:
- Reduction of throughput times by 30-50
- Increase in on-time delivery to over 95
- Reduction in stock levels due to shorter replenishment times
- Improving the ability to respond to changes in demand
Risk and quality indicators
Supply chain resilience is measured using various key figures. These include the reduction of delivery failures, improvement of quality rates and minimization of compliance violations. Security of supply can be quantified by diversifying the supplier base.
Risk factors and controls for reshoring
Despite the benefits, reshoring involves specific risks that must be minimized through appropriate control mechanisms and strategic planning.
Cost risks and profitability
Higher wage and production costs in the home country can affect competitiveness. Careful product costing is therefore essential. Companies must develop realistic scenarios and include cost increases in their planning.
Capacity and availability risks
Local suppliers may not have sufficient production capacity or the necessary expertise. This can jeopardize the security of supply. Dual sourcing strategies help to minimize these risks.
Quality and compliance challenges
New suppliers must first prove their quality capability. Extensive suitability tests and continuous quality controls are required. At the same time, all regulatory requirements must be met, which creates additional complexity.
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Practical example
A German automotive supplier relocated the production of critical electronic components from Asia back to Germany. The decision was based on a comprehensive total cost of ownership analysis, which showed that despite higher labor costs, overall costs were reduced by 15% due to the elimination of transportation costs, reduced inventory levels and improved quality. The implementation took place in three phases over 18 months.
- Phase 1: Identification and qualification of local suppliers
- Phase 2: Pilot production with 20% of the volume
- Phase 3: Complete relocation and optimization of processes
Current developments and effects
Global events and technological advances are accelerating the reshoring trend and permanently changing the framework conditions for procurement decisions.
Geopolitical influences
Trade conflicts and political tensions are increasing awareness of supply chain risks. The Supply Chain Act is also increasing the pressure on companies to make their procurement sources more transparent and controllable. Many organizations are therefore fundamentally rethinking their global procurement strategies.
Technological automation
Advances in automation and AI in Procurement are reducing the differences in labor costs between different locations. Robotics and intelligent manufacturing systems make it possible to produce cost-effectively even in high-wage countries. This development makes reshoring more economically attractive.
Sustainability requirements
Environmental awareness and CO2 reduction targets are driving companies to shorten their transportation routes. Shorter supply chains not only reduce the ecological footprint, but also significantly improve supply chain visibility. Consumers and investors are increasingly rewarding sustainable procurement strategies.
Conclusion
Reshoring is evolving from a niche trend to a strategic necessity for many companies. The combination of geopolitical uncertainties, technological advances and sustainability requirements is making reshoring increasingly attractive. However, successful reshoring initiatives require a holistic view of all cost factors and a systematic approach to supplier development. Companies that master these challenges can make their supply chains more resilient and achieve long-term competitive advantages.
FAQ
What is the difference between reshoring and nearshoring?
Reshoring means the complete relocation back to the home country, while nearshoring describes the relocation to geographically closer, but not necessarily domestic, regions. Both strategies aim to reduce supply chain risks and improve responsiveness.
Which sectors benefit most from reshoring?
Industries with high quality requirements, short product life cycles or critical supply chains benefit particularly from reshoring. These include the automotive industry, medical technology, electronics and mechanical engineering, where flexibility and quality control are crucial.
How do you calculate the profitability of reshoring?
Profitability is determined using a total cost of ownership analysis, which takes into account all direct and indirect costs. This includes production costs, transportation, storage, quality assurance, risk premiums and opportunity costs. Savings often only become apparent when a holistic view is taken.
What risks does reshoring entail for companies?
The main risks are higher production costs, limited local capacities, a lack of qualifications among suppliers and possible supply bottlenecks. These risks can be minimized through careful supplier development, dual sourcing strategies and gradual implementation.
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