The global supply chain is currently being rewritten. Amid lingering COVID-19 echoes, shifting tariff landscapes, and heightening geopolitical tensions, the old playbook of offshore everything is being discarded.
In Europe and Australia, many companies are looking to bring manufacturing back home. But the maths have changed. High energy prices, strict labour laws, and environmental regulations mean that reshoring isn’t a simple binary choice. It is a complex optimisation problem that balances customer satisfaction, compliance, and cost.
If we rely on simplistic spreadsheets to make these moves, we aren’t just oversimplifying—we’re leaving money on the table.
The Hidden Cost of Halfway Offshoring
We recently worked with a prominent manufacturer in the FMCG and grocery space that
illustrates why a gut-feeling strategy often fails.
The client had a split model:
1. Local Production: Reserved for complex, small-batch orders with short lead times.
2. Offshore Production: Reserved for stable, high-volume products where the customer prioritised price over speed.
On paper, it looked logical. In practice, it created a utilisation death spiral. To meet local demand, the factory required specialised machinery and skilled operators. However, because so much volume had been sent offshore, these local assets sat idle for long stretches. The skyrocketing overhead of an underutilised domestic factory was cannibalising the savings from offshore production.
Finding the “Marginal” Sweet Spot
Using the Opturion Optimiser, we moved past basic accounting and explored the problem
analytically. We looked at variables that a standard spreadsheet can’t juggle simultaneously:
- Marginal Cost Analysis: If a machine is already powered on and a worker is already on the clock, the cost of producing the next unit is just the cost of raw materials and energy. In many cases, this marginal cost was actually lower than the landed cost of an offshore product.
- Logistics Agility: We modelled the impact of airfreighting specific offshore components to meet short windows, rather than keeping expensive local lines on standby.
- Risk vs Waste: We calculated the cost-benefit of overproducing local stock (accepting the risk of obsolescence) versus the cost of losing a sale.
- Collaborative Incentives: We explored ways to incentivise customers to take on some inventory risk in exchange for better pricing.
The Big Lesson: Risk is a Currency
The most fascinating takeaway wasn’t just about moving production lines; it was about the
relationship between cost and risk.
Usually, we talk about supply chain risk in terms of security or delays. But in this case, a willingness to strategically manage risk – and share it with the customer – unlocked significant cost reductions for both parties.
The Bottom Line: You cannot solve a 2026 supply chain problem with 1990s tools. If you are reviewing your offshoring strategy, don’t just ask “where is it cheaper?” Ask, “How does this optimise my entire ecosystem?”
