Does Offshoring Still Make Sense?
2-17-2009
"For years, the concept of off-shoring, or moving production and/or sourcing operations to a foreign country, has been the mantra of any supply chain manager looking to cut costs," said John Ferreira, Principal and Global Manufacturing Industry Practice Leader, Archstone Consulting. "Now, amid volatile oil prices and an uncertain global economic future, this analysis no longer is a certainty. Furthermore, companies that will commit to domestic manufacturing can spur much-needed improvements in customer service, innovation, and job creation - especially when servicing the large domestic market."
A Wake-up Call for Manufacturers
The Archstone study revealed that in the last three years, manufacturers have seen a significant increase in costs related to off-shoring manufacturing for export purposes rather than in country demand, which include:
• Ocean freight costs have increased 135 percent, highlighting risks and cost volatility.
• The global commodity price index has risen by 27 percent.
• The Chinese Yuan has gained 18 percent in value compared to the U.S. dollar.
• Chinese manufacturing wages have risen by 44 percent.
The True Cost of Offshoring
In addition to the rising costs of conducting business on a global basis, the study found several soft cost issues, which affect the true cost of offshoring, including:
• Slower Cycle/Delivery Time (59% of respondents)
• Reduced Supply Chain Flexibility and Responsiveness (56% of respondents)
• Lost Visibility, Coordination and Control Over the Supply Chain including Quality (50% of respondents)
• Bottlenecks in Logistics Networks (e.g., ports, transportation) (50% of respondents)
"The perceived 25-40 percent cost savings associated with offshoring has previously been made possible by low labor costs, cheap commodities and favorable exchange rates - factors that no longer exist in today's marketplace," continued Mr. Ferreira.
Project Announcements
Axle Logistics Expands Knoxville, Tennessee, Operations
11/29/2023
EquipmentShare Establishes Moberly, Missouri, Operations
11/29/2023
IronLink Logistics Plans Ladson, South Carolina, Operations Hub
11/24/2023
Maid-Rite Specialty Foods Expands Dunmore, Pennsylvania, Operations
11/24/2023
Pipe & Steel Industrial Fabricators Expands Livingston Parish, Louisiana, Operations
11/24/2023
Sage Automotive Interiors Expands Abbeville County, South Carolina, Operations
11/23/2023
Most Read
-
2023 Top States for Doing Business Meet the Needs of Site Selectors
Q3 2023
-
The Rise of Mid-Size U.S. Cities: The Industrial Development Boom
Q3 2023
-
Front Line: Brownfields Offer Redevelopment Opportunities
Q4 2023
-
2023 Top States Commentary: Top-Ranked States Have What It Takes to Win Mega Projects
Q3 2023
-
37th Annual Corporate Survey: Economic Pressures Exerting Greatest Effect on Decision-Makers
Q1 2023
-
2023 Top States Workforce Development Programs
Q3 2023
-
Immigration: A Potential Fix for Labor Shortages?
Workforce Q4 2023