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Reshoring: definition & important aspects for buyers
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Reshoring in a nutshell:
Reshoring describes the strategic relocation of production and procurement activities that were previously outsourced abroad back to the country of origin. For purchasing, this means realigning the supplier structure with a focus on domestic markets in order to make supply chains more robust and reduce dependencies.
Example: A German automotive supplier relocates its electronic component production from China back to Germany in 2023 and invests EUR 50 million in a new production facility, reducing delivery times from 12 to 3 weeks and increasing security of supply.
Contents
Introduction to reshoring
What is reshoring?
Reshoring refers to the process by which companies return their production or procurement activities that were previously relocated abroad to their home country or closer to their main sales market. The reasons for this are often higher transportation costs, increasing quality requirements, risks in global supply chains or political uncertainties. By reshoring, companies can strengthen control over their processes, increase flexibility and respond better to market changes.
Core elements of reshoring
- Relocation: Returning production and procurement to Germany or nearby countries.
- Supply chain optimization: Simplification of the supply chain by reducing intermediate stations and transport routes.
- Quality improvement: Improving product quality through proximity to development centers and strict standards.
- Risk minimization: Reduction of geopolitical risks and dependencies on foreign markets.
Importance of reshoring for purchasing
In purchasing, reshoring plays a central role in the realignment of procurement strategies. By shifting procurement back to the domestic market, buyers can make supply chains more transparent and intensify supplier relationships. This leads to increased flexibility and faster responsiveness to market requirements. Reshoring also enables better control of compliance guidelines and sustainability standards.
- Local supplier development: Establishing and maintaining partnerships with regional suppliers.
- Cost-benefit analysis: Analysis of total costs, taking quality and logistics aspects into account.
- Sustainable procurement: promotion of environmentally friendly practices and compliance with legal regulations.
Implementation of reshoring
By strategically relocating production and procurement activities back to the domestic market, companies can simplify supply chains, reduce risks and raise quality standards.
Case study: A textile company brings back production
Initial situation: A German textile company previously had its products manufactured in the Far East. However, problems with delivery delays, rising transportation costs and quality defects were affecting the company's competitiveness:
- Analysis of total costs: evaluation of production, transportation and quality costs abroad versus at home.
- Building local partnerships: cooperation with regional fabric suppliers and production facilities.
- Investment in automation: introduction of modern production technologies to reduce costs.
Results:
- Reduced delivery times: From previously 8 weeks to now 2 weeks.
- Improved quality: fewer returns thanks to higher production standards.
- Cost optimization: savings in logistics and warehousing despite higher wage costs.
Practical benefits for purchasing:
- Closer cooperation with suppliers for faster adaptation to market trends.
- Increased delivery reliability thanks to shorter transportation routes.
- Strengthening the brand image through "Made in Germany".
Evaluation and strategic findings on reshoring
✓ Critical success factors
→ Holistic cost analysis: consideration of all direct and indirect costs for well-founded reshoring decisions
→ Supplier network: building a robust local supplier network with a focus on quality and flexibility
→ Technological innovation: investment in automation and digital production to compensate for higher labor costs
⚠ Central challenges
→ Skills shortage: difficulty finding qualified personnel for modern production facilities
→ Investment costs: High initial capital requirement for production setup and technology
→ Supplier qualification: Time-consuming process for identifying and developing local suppliers
Future trends and strategic implications:
"Reshoring is developing from a risk minimization strategy into a strategic competitive advantage."
→ Increased regionalization of supply chains
→ Integration of Industry 4.0 in local production facilities
→ Increasing importance of sustainability criteria
→ Hybrid sourcing models with a local focus
Conclusion on reshoring
Reshoring is becoming a key strategic tool for forward-looking companies. Reshoring production and procurement activities not only enables better control over quality and supply chains, but also creates competitive advantages through greater flexibility and customer proximity. Despite initial challenges such as high investment costs and a shortage of skilled workers, the long-term benefits outweigh the costs: shorter delivery times, increased product quality and improved sustainability. For procurement, this means a new focus on local partnerships and the integration of modern technologies.
