What OEMs Should Know Before Switching to Domestic Contract Manufacturing

Elsner Engineering Works: Purpose-Built Precision Since 1934

The reshoring conversation has shifted from theoretical debate to operational reality. Cumulative reshoring and foreign direct investment announcements now exceed two million jobs since 2010, with 244,000 positions announced in 2024 alone. Yet moving production from offshore suppliers to domestic contract manufacturers involves more complexity than simply changing purchase orders. As a dedicated manufacturing partner for industrial automation solutions, we have seen that OEMs that approach a domestic contract manufacturing transition methodically report substantially better outcomes than those who treat reshoring as a procurement exercise.

The data supports careful preparation. According to the 2025 Reshoring Survey conducted by the Reshoring Initiative, 96 percent of OEMs who completed reshoring programs reported being very satisfied or somewhat satisfied with results. That satisfaction rate doesn't happen by accident—it reflects rigorous supplier evaluation, realistic cost analysis, and structured transition processes that prevent the quality escapes during the move to domestic contract manufacturing services.

Getting the Cost Analysis Right

The most common mistake OEMs make when evaluating domestic versus offshore options involves incomplete cost comparisons. Only 30 percent of OEMs use total cost of ownership calculations when comparing domestic to offshore sourcing. The remainder rely on FOB pricing, landed cost, or other simplified methods that ignore 15 to 25 percent of actual offshoring costs including quality remediation, inventory carrying costs, intellectual property risk, and supply chain management overhead.

Total cost of ownership analysis reveals that domestic manufacturing often proves more competitive than initial price comparisons suggest. The Reshoring Initiative's data on 190 cases comparing China to the U.S. showed the domestic win rate jumping from 8 percent based on FOB price to 32 percent when evaluating total cost of ownership. This difference matters—OEMs who base a domestic contract manufacturing transition on incomplete cost data either reject viable domestic options or proceed with unrealistic expectations about savings.

Contract manufacturers report that 91 percent of orders they lose to imports come down to price competition. Yet when OEMs actually evaluate domestic suppliers using comprehensive cost models, quality advantages, delivery speed, and reduced supply chain risk frequently offset unit price differentials. The key lies in ensuring your procurement team applies consistent methodology that captures all relevant factors rather than comparing offshore FOB prices against domestic landed costs.

Understanding the broader economic forces driving reshoring momentum provides context for individual sourcing decisions. Why U.S. Manufacturers Are Abandoning Offshore Production in 2025 examines the trade deficit realities and geopolitical pressures accelerating domestic manufacturing investments across industries.

Supplier Qualification Beyond Price

Effective domestic supplier evaluation encompasses capabilities, quality systems, capacity, and business stability. The NIST Manufacturing Extension Partnership's Supply Chain Management guidance emphasizes that OEMs should assess supplier readiness across people, certifications, automation, and process stability—not just quoted prices and stated lead times.

Quality systems certification provides baseline assurance but doesn't guarantee performance. ISO 9001:2015 certification demonstrates a supplier maintains documented quality management systems. Industry-specific certifications like AS9100 for aerospace or ISO 13485 for medical devices indicate familiarity with regulatory requirements in those sectors. However, certifications represent minimum qualifications rather than competitive differentiators. On-site audits, sample production runs, and reference checks with existing customers reveal actual quality performance.

Capacity assessment requires understanding not just current utilization but growth trajectory. A provider of contract manufacturing services operating at 95 percent capacity may quote attractive pricing to win new business but struggle to deliver when production demands increase. Conversely, a facility with significant available capacity may indicate business challenges that affect long-term viability. Ask direct questions about machine utilization, shift patterns, workforce expansion plans, and capital investment schedules.

Financial stability matters more for reshoring relationships than typical supplier arrangements. Transitioning production to a domestic manufacturer involves qualification costs, potential tooling investments, and operational disruption. If your new supplier experiences financial distress months into the relationship, you face the prospect of starting over—with all associated costs and delays. Request financial statements, check payment history with their suppliers, and evaluate ownership structure stability.

Engineering Integration Advantages

The 2025 Reshoring Survey found that 45 percent of OEMs cited manufacturing located near engineering as a top reason for reshoring—the highest-ranked factor alongside freight and duty reduction. This proximity advantage delivers tangible benefits during a domestic contract manufacturing transition that offshore suppliers cannot match, regardless of their technical capabilities.

Same-day site visits enable engineers to observe production processes, troubleshoot quality issues, and implement design changes rapidly. When problems emerge with offshore suppliers, resolution often requires lengthy email exchanges, time zone challenges, and eventual travel that delays corrective action by weeks or months. Domestic suppliers can host engineering reviews within hours of identified issues, accelerating problem resolution and preventing defect propagation.

Design for manufacturability collaboration improves when engineers can work directly with production personnel. Domestic contract manufacturers often identify cost reduction opportunities, tolerance adjustments, and material substitutions that offshore suppliers either miss or fail to communicate effectively. This collaborative relationship reduces total product cost beyond simple unit price comparisons while improving quality and reliability.

Prototype and pilot production benefit enormously from geographic proximity. Iterating on new designs requires rapid turnaround between engineering changes and physical samples. Domestic suppliers can produce prototype parts in days rather than the weeks required for offshore shipment. This acceleration compresses development timelines and enables more design iterations before production commitment.

For OEMs evaluating regional contract manufacturing options, understanding the advantages specific geographic clusters offer proves valuable. How Mid-Atlantic Contract Manufacturers Are Filling the Reshoring Gap explores the infrastructure, workforce, and ecosystem benefits that make certain regions particularly attractive for domestic production.

Transition Planning and Risk Mitigation

Successful reshoring requires structured transition planning that addresses qualification, parallel production, and contingency scenarios. Contract manufacturers report that the typical reshoring scenario involves OEMs with U.S. assembly operations shifting component sourcing from offshore to domestic suppliers—a domestic contract manufacturing transition that demands careful coordination to prevent production disruptions.

Qualification timelines vary significantly based on product complexity and regulatory requirements. Simple machined components might qualify within weeks through dimensional verification and material certification. Medical devices, aerospace components, or products with extensive regulatory documentation may require months of process validation, production trials, and paperwork submission before production approval. Build realistic qualification timelines into your transition plan rather than assuming domestic suppliers can immediately absorb production volumes.

Parallel production periods reduce transition risk by maintaining offshore supply while domestic component assembly services ramp up. This approach costs more during the overlap period but prevents the delivery gaps that occur when new suppliers encounter unexpected challenges. The duration of parallel production should reflect product criticality, demand volatility, and confidence in the new supplier's readiness.

Contingency planning addresses scenarios where domestic transitions encounter problems. Identify fallback options before committing fully to supplier changes. Understand whether your offshore supplier would accept return business if needed, what alternative domestic sources exist, and how much safety stock provides adequate buffer during transition periods. Hope is not a risk management strategy.

Building Productive Long-Term Relationships

The most successful reshoring relationships evolve beyond transactional procurement into collaborative partnerships. OEMs who treat domestic contract manufacturers as strategic partners rather than interchangeable vendors report better quality, faster problem resolution, and more proactive cost reduction than those maintaining arm's-length relationships.

Communication cadence differs for domestic versus offshore suppliers. Geographic proximity and shared time zones enable more frequent interaction—take advantage of this accessibility. Regular production reviews, quality data sharing, and demand forecast updates help domestic suppliers plan capacity and inventory more effectively. This visibility improves delivery performance while reducing the safety stock requirements that add cost throughout the supply chain.

Volume commitments influence supplier investment decisions. A shop offering turnkey contract manufacturing considering equipment upgrades, workforce expansion, or capability development needs reasonable confidence that customer volumes justify these investments. OEMs who provide demand visibility, commit to minimum volumes, or share growth projections create incentives for supplier investments that benefit both parties.

Continuous improvement expectations should be explicit from relationship inception. World-class contract manufacturers embrace productivity improvement as an ongoing obligation rather than a one-time cost reduction exercise. Establish expectations for year-over-year cost reduction, quality improvement targets, and lead time compression. Structure agreements to share savings from improvement initiatives, aligning incentives between OEM and supplier.

Elsner Engineering Works: Your Domestic Manufacturing Partner

At Elsner Engineering Works, we've supported OEM reshoring initiatives from our Hanover, Pennsylvania facility since 1934. Our 112,000 square foot ISO 9001:2015 certified operation combines precision manufacturing capabilities with the engineering collaboration that domestic partnerships enable.

Our Services Include:

• Contract Manufacturing - Turnkey production with comprehensive quality systems supporting demanding applications across industrial, medical, and consumer sectors
• Precision Machining - 5-axis CNC capabilities with tolerances to ±0.0005" for components requiring exceptional accuracy

Ready to Evaluate Domestic Manufacturing? Contact Elsner Engineering Works to discuss how our capabilities, quality systems, and regional location can support your reshoring requirements.

Works Cited

"2025 Reshoring Survey Report." Reshoring Initiative, Reshoring Initiative and Regions Recruiting, Apr. 2025, reshorenow.org/content/pdf/2025_Reshoring_Survey_Report_Portrait-compressed.pdf. Accessed 10 Dec. 2025.

"Supply Chain Management." National Institute of Standards and Technology, U.S. Department of Commerce, 14 July 2025, www.nist.gov/mep/supply-chain. Accessed 10 Dec. 2025.

Related Articles

• Why U.S. Manufacturers Are Abandoning Offshore Production in 2025
• How Mid-Atlantic Contract Manufacturers Are Filling the Reshoring Gap