Onshoring Your Supply Chain Has Its Advantages, Especially Now [10 Benefits]

With the incoming presidential administration proposing tariffs on imported goods ranging from 20% to 60%, now is an excellent time to reduce your dependence on overseas suppliers and help to create or sustain jobs in U.S. communities that promote economic growth in those cities and towns.

As an American company,  we always try to purchase our feedstocks and other materials and equipment domestically. This practice illustrates our belief in supporting U.S. job growth. It also makes it easier for us to receive our production inputs on time and fill orders on schedule.

Regardless of whether or to what extent the tariff proposals become law, relying on domestic manufacturers allows you to:

1. Reduce Your Exposure to Global Unrest. With conflicts and weather patterns affecting global commerce, sourcing products domestically eliminates the need to pay an “extra” tax on top of the sales tax in your state. Even if your facility is in a state with no sales tax (Alaska, Delaware, Montana, New Hampshire, or Oregon), you’ll still pay more for imported parts, components, or materials.

2. Lower Production Costs. By avoiding payment of a surcharge, you can reduce your overhead costs and increase the flexibility to maintain or increase profit margins that would be lower or non-existent if you had to pay tariffs.

3. Experience Fewer Supply Chain Disruptions. Domestic suppliers often provide more reliable and faster delivery than overseas trading partners, decreasing lead times and disruptions that can occur, often suddenly and without warning, when transporting goods between countries.

4. Achieve Higher Profit Margins. The inability of most manufacturers to pass the full cost of tariffs on to customers means that manufacturers often must absorb some of the cost, leading to reduced profit margins. This reality can affect the business’s financial health and lead to potential losses and workforce reductions if the tariffs persist over a long period.

5. Strengthen the Ability to Make Investments. With higher profit margins achieved by using domestic suppliers, manufacturers have more ability to invest in new technologies, facility expansions, and worker training. This “found money” can have long-term positive effects on a company’s ability to be innovative and competitive.

6. Reduce Supply Chain Complexity. To mitigate the actual cost or potential risk of tariffs, companies should rely on multiple suppliers. Although this approach can enhance resilience, it is an arrangement that is more difficult to manage, has the potential to increase indirect costs with complex supplier validation processes, and has its own set of risks compared to relying on supply chain partners closer to home.

7. Improve Quality Control. Because domestic suppliers are subject to the same regulations and industry standards that you are, there is a higher probability that the materials, assemblies, or parts you order will meet specifications and other requirements perfectly.

8. Eliminate Risks of Currency Exchange Rates. By sourcing products domestically, you are not vulnerable to currency fluctuations that can affect the cost of imported goods, and ultimately, your company’s ability to remain competitive.

9. Strengthen the Protection of Your Intellectual Property. Domestic sourcing reduces the risk of intellectual property theft, which has proven to be a concern when dealing with overseas suppliers.

10. Decrease Your Environmental Impact. By sourcing products domestically, you ship them shorter distances, which results in less energy consumption compared to overseas shipments. By reducing your carbon footprint, you can operate at a level of sustainability that some customers may appreciate.

Depending on the parts, components, materials, and other production inputs you use, and which are subject to tariffs, the case for keeping your supply chain close to home could be a practical way to overcome the uncertain geopolitical environment, increasingly unpredictable weather patterns, and inflation that lingers from disruptions that began during the pandemic.

To avoid or minimize tariff payments and strengthen your operations by relying on domestic supply chain partners, consider using Bergad to meet your technical foam needs. To learn more, visit https://www.bergad.com/