By Joseph Natarelli of Marcum LLP
Originally published February 1, 2023
Onshoring for construction contractors is a strategy aimed at reducing supply chain delays by bringing production and manufacturing processes back to the home country. This shift away from relying on offshore suppliers is driven by various factors, including the COVID-19 pandemic and geopolitical tensions that have disrupted global supply chains. Here are some of the plusses and minuses of onshoring, and some strategies to consider.
BENEFITS OF ONSHORING
• Reduced Supply Chain Delays: Onshoring helps to mitigate supply chain disruptions and delays by reducing the number of intermediaries involved in the production and distribution of goods.
• Improved Quality Control: With onshoring, construction contractors have greater control over the quality of the materials and products used in their projects.
• Increased Resilience: Onshoring makes supply chains more resilient by reducing their dependence on shipping, thereby reducing the risk of supply chain disruptions.
CHALLENGES OF ONSHORING
• Increased Costs: Onshoring can result in increased costs due to higher wages, higher taxes, and increased regulatory compliance.
• Limited Availability of Skilled Labor: Finding skilled workers in the home country, particularly in the U.S., to replace offshore workers can be a challenge due to the stubborn shortage of talent.
• Difficulties in Adapting to New Technologies: Onshoring may require construction contractors to adopt new technologies and processes already being used by previous offshore suppliers.
STRATEGIES FOR SUCCESSFUL ONSHORING
• Develop a Strategic Plan: Develop a strategic plan for onshoring that considers the costs, benefits, and risks involved.
• Partner with Local Suppliers: Partner with local suppliers to increase access to raw materials and other inputs needed for projects.
• Invest in Skilled Labor: Investing in skilled labor and training programs can help alleviate the limited availability of skilled workers.
• Adopt New Technologies: Adopt new technologies and processes to become more competitive efficient.
Onshoring is a strategy that construction contractors can use to mitigate supply chain delays and improve their competitiveness. While onshoring can present some challenges, such as increased costs, limited skilled labor availability, and to the need to adopt new technologies, these challenges can be overcome through careful planning and investment. With the proper investment, construction contractors can ensure the resilience and efficiency of their supply chains, reduce their dependence on offshore suppliers and contractors, and strengthen their positioning for future growth and profitability.
ADDITIONAL RESOURCES
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Article is reprinted with permission from Marcum LLP and originally appeared on marcumllp.com.
Joseph Natarelli is office managing partner of Marcum's New Haven, Connecticut office and a member of the Firm’s Executive Committee. Natarelli also serves as national leader of Marcum’s Construction Services practice, overseeing audit, consulting, and taxation services to construction clients ranging from start-ups to multi-billion-dollar international enterprises. He can be reached at joseph.natarelli@marcumllp.com or 203.781.9710.