In this article, we discussed onshoring, why are companies moving operations onshore, the benefits, the challenges, the examples, strategic steps to move operations onshore.
Definition
Onshoring is the practice of moving business operations and jobs back to a company’s home country from a foreign country, according to Westing Fulfillment and ESCATEC}. Also known as onshoring or reshoring, it aims to reduce supply chain costs, improve quality control, and increase efficiency by bringing production and services back home.
Onshoring refers to the process of relocating business functions, such as production, services, or supply chain activities, from foreign countries back to the company’s home country.
Why Are Companies Moving Operations Onshore:
Several global and local factors are driving the resurgence of onshoring:
- Supply Chain Disruptions
Events like the COVID-19 pandemic, the Suez Canal blockage, and geopolitical tensions (e.g., U.S.–China trade relations) exposed the fragility of global supply chains.
- Rising Offshore Costs
Labor costs in traditional offshore locations (like China and India) have increased significantly. Combined with shipping costs, tariffs, and taxes, the cost advantage of offshoring is shrinking.
- Demand for Speed and Customization
Customers expect faster delivery, better service, and personalized products. Onshore operations allow for shorter lead times and greater agility in meeting these demands.
- ESG and Sustainability Pressures
Stakeholders are demanding environmentally and socially responsible practices. Onshoring can reduce carbon footprints, improve labor standards, and strengthen local communities.
- National and Local Incentives
Governments are offering tax breaks, grants, and other incentives to promote domestic manufacturing, tech development, and job creation.
The Benefits of Moving Operations Onshore:
Economic Growth: Onshoring creates local jobs, boosts community spending, and supports local businesses.
Strengthened Supply Chains: Bringing operations home reduces reliance on international suppliers, leading to more reliable and resilient supply chains.
Quality Control: Businesses can better monitor processes, enforce standards, and ensure compliance with local regulations when operations are domestic.
Regulatory Compliance: Onshore operations make it easier to adhere to local laws and regulations.
Corporate Credibility: Being established locally can enhance a company’s credibility within its domestic corporate environment.
Access to Financing: Onshore businesses often find it easier to secure banking and financing services, as local banks are more familiar with their operations.
Operational and Strategic Advantages
Simplified Logistics: Onshore operations can have simpler and less expensive logistics compared to the complex and costly infrastructure required for offshore drilling, for example.
Flexibility: Onshoring can provide greater flexibility in business operations and management.
Sustainability: Relocating operations domestically can contribute to greater sustainability efforts.
Time Savings: Onshore outsourcing or operations can lead to quicker turnaround times, saving valuable time for individuals within the organization.
The Examples Moving Operations Onshore:
Oil and Gas Industry Moves
Company Divestment: Major international oil companies (IOCs) are increasingly selling their onshore oil and gas portfolios in countries like Nigeria, with domestic oil companies (DOCs) taking over these operations.
Rig Relocation: Drilling rigs are moved from their offshore or remote locations to new onshore sites, often requiring the dismantling, transportation, and reassembly of heavy equipment.
Infrastructure Development
Pipeline Construction: The laying of onshore pipelines is a significant onshore operation, involving clearing the right-of-way, trenching, welding the pipes, and then backfilling.
Transport Networks: Transportation of refined petroleum products from refineries to markets also occurs onshore, primarily via tank trucks to service stations and homes, and through pipelines for larger volumes.
Specialized Manufacturing
Equipment Production: Components for large-scale oil and gas operations, such as specialized rigs or modules, are often built and assembled onshore at manufacturing facilities before being shipped to their deployment locations.
Logistics of the Move
Rig Move Operations: The process of physically moving an onshore drilling rig involves disassembling it in a specific order, transporting the heavy components using specialized trucks, and then reassembling it at the new site in the reverse order.
Safety Protocols: Due to the scale and inherent dangers of moving heavy iron, rigorous safety protocols are implemented, including the use of buddy systems, proper tool maintenance, and awareness of hazards like moving trucks and suspended loads.
The Strategies and Steps Moving Operations Onshore:
- Strategic Planning & Preparation
Develop an Operations Strategy: Create a blueprint to define how resources will be allocated to achieve business objectives and optimize processes, according to Nulab.
Conduct Site Surveys: Perform thorough surveys of the new onshore location to identify any potential challenges or requirements for the setup and infrastructure.
Create Detailed Move Plans: Develop comprehensive plans that outline the sequence of events, including the types and dimensions of loads, the necessary cranes and truck loads, and specific procedures for dismantling and reassembling equipment.
- Logistics & Infrastructure
Coordinate Logistics: Plan the number and types of trucks, trailers, and cranes needed, and map the route for safe transport of equipment.
Prepare the New Location: Ensure the new onshore site is cleared and prepared for the arrival of equipment and personnel, including laying out the camp and rig area, says Scribd.
Plan for Infrastructure: Align and assemble substructures, test equipment like mud pumps, and ensure all necessary connections and safety features are in place.
- Personnel & Communication
Establish Communication Channels: Implement social software tools and online platforms for effective communication and collaboration between different teams and departments, according to SAP Community.
Set Clear Expectations: Communicate workflows, deadlines, and roles clearly to both onshore and offshore staff to foster a shared understanding and accountability.
Provide the Right Tools: Equip your teams with the necessary tools, technology (like video conferencing), and resources to ensure efficient and productive operations.
Foster Relationships: Create trusting relationships among teams by ensuring open and regular communication, which is vital for successful operations, notes Micro Sourcing.
- Safety & Compliance
Prioritize Safety: Conduct pre-move safety meetings, establish clear lines of responsibility, and develop emergency procedures, including notification charts and medical evacuation plans, according to Drilling Manual.
Document Everything: Maintain thorough documentation of all processes, plans, and procedures to ensure accountability and to facilitate future operations.
Conduct Inspections: Perform pre-spud (start of drilling) inspections on all equipment, including the drill floor, derrick, and mud systems, to ensure everything is in working order.
The Challenges of Moving Operations Onshore:
Economic Challenges
Higher Costs: Onshore operations often incur higher labor and operational costs compared to offshore alternatives.
Supply Chain Disruptions: Delays in port operations, inadequate logistics for goods movement, and a limited capacity in ports can create significant disruptions along the supply chain.
Operational & Infrastructure Challenges
Limited Talent Pool: Depending on the industry, there may be a scarcity of skilled workers domestically needed to support onshore operations.
Infrastructure Limitations: Insufficient infrastructure for utilities or a lack of necessary facilities can hinder onshore development.
Logistics Complexity: Moving goods inland from ports requires robust and efficient onshore logistics systems, including trucking and warehousing, which can be prone to delays.
Environmental & Safety Challenges
Land Disturbance: Onshore development, especially in sectors like oil and gas, often involves significant land clearing and infrastructure construction, impacting ecosystems and wildlife.
Environmental Risks: Onshore facilities, particularly in oil and gas, must contend with risks related to water resources, emissions, and induced seismicity, requiring constant monitoring and data management.
Public Safety: Onshore facilities, being closer to populated areas, can pose greater risks to public safety and may be more susceptible to challenges like traffic congestion during emergencies.
Cultural & Technological Challenges
Cultural Shifts: A shift from traditional operational models to those involving digital technologies requires a cultural adaptation within organizations to align management with new digital applications.
Technological Gaps: The implementation of necessary technologies, such as automation for port operations or sensors for environmental monitoring, can face challenges related to cost and integration.
Conclusion
Moving operations onshore is a strategic transformation, not merely a logistical change, that offers long-term competitive advantages such as increased resilience, greater control, enhanced customer satisfaction, and better sustainability. Despite initial costs and complexities, this strategy delivers agility, accountability, and reliability, establishing it as a vital approach for modern businesses in a competitive global market.