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Onshoring: definition & important points for buyers
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Onshoring in a nutshell:
Onshoring describes the relocation back to the home country of production and procurement activities that were previously outsourced abroad. For purchasing, this means realigning the procurement strategy with a focus on domestic suppliers in order to minimize supply chain risks and benefit from shorter transport routes.
Example: A German automotive supplier relocates its electronic component production from Asia back to Germany in 2023, reducing transportation time from 8 weeks to 5 days, while reducing supply chain complexity by 60%.
Contents
Introduction to onshoring
What is onshoring?
Onshoring refers to the relocation of production and service processes from abroad back to a company's home country. In contrast to offshoring, where business activities are outsourced abroad, onshoring aims to operate closer to the domestic market, better comply with quality standards and shorten supply chains. This strategy enables companies to react more quickly to local market conditions and optimize costs by reducing logistics.
Core elements of onshoring
Significance for purchasing
Onshoring is becoming increasingly relevant in procurement management as it minimizes risks in the supply chain and increases security of supply. By being close to suppliers, buyers can react more flexibly to market changes and avoid bottlenecks. Onshoring also enables more intensive collaboration with local partners, promotes innovation and supports sustainable procurement strategies by reducing transportation emissions.
Whitepaper: Onshoring - Strategic realignment of the supply chain for greater resilience
Application of onshoring in purchasing
By shifting procurement processes back to the domestic market, companies can optimize supply chains and minimize risks. Onshoring enables closer cooperation with local suppliers, faster response times and strengthens security of supply.
Case study: Successful relocation of a supplier
A German electronics company had previously purchased components from an Asian supplier. Due to long delivery times and quality problems, the purchasing manager decided to find a local supplier. After evaluating several suppliers, a regional company was selected. Results:
1. delivery time reduced from 8 to 2 weeks
2. quality improvement through direct communication
3. savings of 15% on transportation and storage costs
4. greater flexibility for repeat orders
Onshoring has enabled the company to make its production processes more efficient and increase customer satisfaction.
Evaluation and strategic findings on onshoring
✓ Critical success factors
→ Supplier qualification: systematic evaluation and development of local suppliers to ensure quality and capacity
→ Cost management: offsetting higher production costs by optimizing the total cost of ownership
→ Process integration: Establishing efficient communication and coordination processes with local partners
⚠ Challenges and limitations
→ Capacity bottlenecks: limited availability of specialized suppliers in Germany
→ Cost pressure: higher wage and production costs compared to low-wage countries
→ Technology gap: Potential technology gaps between local suppliers and established global suppliers
Future trends and strategic implications:
"Onshoring is evolving from a crisis management tool to a strategic pillar of resilient supply chains."
→ Increased regionalization of the supply networks
→ Integration of sustainability aspects in onshoring decisions
→ Digital networking of local supplier ecosystems
→ Hybrid procurement models (mix of on- and offshoring)
Conclusion on onshoring
Onshoring is proving to be an important strategic option for companies that want to optimize their supply chains and minimize risks. Despite higher production costs in Germany, the advantages such as shorter delivery times, better quality control and increased security of supply outweigh the disadvantages. Success depends largely on careful supplier selection and well thought-out cost management. Especially in times of global uncertainty, onshoring offers a valuable approach for sustainable and resilient procurement strategies.
