Freight rates settled, but the buyers we talk to still keep production closer to home. Here is what they say when you ask them why.
Freight rates came back down. The container that cost fourteen thousand dollars to move in 2021 costs a fraction of that now, and by the arithmetic that drove the first wave of near-shoring, a good deal of it should have reversed.
It has not. The buyers we sit with are still moving work closer to home, and when you ask them why, almost nobody leads with price.
What they say instead is that they are buying certainty. A supplier four hours away can be visited on Tuesday when something goes wrong on Monday. A tooling change can be agreed in a morning rather than over three weeks of time-zone ping-pong. When a customer moves a delivery date, the answer comes back the same day.
The second reason is that their own customers now ask. Automotive and aerospace buyers put questions about supply chain resilience into tenders that, five years ago, asked only about price and lead time. A manufacturer who cannot answer those questions loses the tender before the price is read.
The third is quieter and harder to put in a spreadsheet: the people who understood the original process are retiring. Moving production back is, for some of these firms, the last chance to move the knowledge with it.
None of this makes the arithmetic go away. Labour is more expensive here, energy has been volatile, and a plant that runs at sixty per cent of capacity is a bad plant wherever it stands. What has changed is that cost is now one input among four rather than the only one, and the other three do not move with the freight index.
- Ask what a day of downtime costs, not what a unit costs.
- Ask who in the building can still set the machine by hand.
- Ask what the biggest customer's tender will ask for in three years.
For the businesses we work with, that reframing usually changes the answer. It also changes what the financing has to look like: shorter payback assumptions on the equipment, and more headroom for the eighteen months in which a relocated line is not yet running at the rate it was promised.
We would rather fund that headroom honestly at the start than refinance a stalled move at the end.