In 1998, as much as 85% of e-commerce purchases were shipped between businesses. But along came Amazon, which helped convince a generation of Americans to buy even humdrum household items like diapers and toiler paper online rather than at the store. UPS drivers who used to drop off a bunch of heavy packages each day at one retailer, now make several stops scattered across a neighborhood, delivering one lightweight package per household. The shift required more fuel and more time, increasing the cost to deliver each package.
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“Recently, rising energy prices, wage inflation and customer demand for shorter lead times have led many U.S. companies to consider “reshoring” the production of goods bound for domestic markets back to America,” writesIndustry Week (Aug.5, 2014). But getting it right can be tricky. A decision to reshore needs to consider the following 7 issues:

1. A focus on total costs instead of unit costs: By focusing on unit costs instead of the total cost of ownership – which includes costs such as transportation, intellectual property risks and inventory carrying costs – manufacturers are overestimating potential savings from overseas operations by 20%- 30%.

2. Invest time to Continue reading →