How do we explain off-shoring?
if proximity to major markets - or closeness to customers - is an
important factor in choosing a location, why are many companies
off-shoring jobs to locations that are half way around the world from
their customers? The answer is in the business model dictated by the
Some 70 percent of the respondents to Area
Development's 2005 Corporate Survey were from the manufacturing sector,
and 15 percent of the respondents were from the distribution sector.
Collectively, 85 percent of the respondents are clearly driven by
supply-chain evaluation and influence. The respondent companies have
learned to fit into their customers' location expectations and - in the
case of both manufacturing and distribution - physical closeness is
On the other hand, in most cases involving
off-shoring of employment, it is the service sector making these
decisions. These location choices are still driven by customer mandate
of product cost, quality, and delivery time. Off-shoring allows for a
less costly product and an unaffected delivery time (via electronic
transfer), although, in some cases, quality is still under review. In
these instances, physical proximity is not expected by the customer.
the annual survey continues to report the trends and changes in
corporate thinking, keep an eye on this dimension. Also, keep in mind
that American industry, generally speaking, has now reached a level of
maturity, and finding "new markets" is rather difficult -
Cranmer and Art Wegfahrt are location and real estate consultants in
the Corporate Services Practice at Studley, Inc. Together, they have
over 60 years experience in advising corporations on strategy, location
selection, and implementation.