We define offshoring as moving operations from a high cost economy, often the ‘home’ country of the firm, to a low cost economy (page 444). And this whole issue has had a much higher profile with the election of Donald J. Trump as POTUS. He has made much of bringing back jobs to the USA that had been offshored. But he is probably five, if not ten, years behind the times, as this HfS article explains.
HfS is a services research company. The thrust of the article is neatly summarised in its title: “Offshore has become Walmart…as Outsourcing has become more like Amazon”. Thirty years ago manufacturing was relatively labour intensive. Back then it made sense to move factory operations overseas to a labour market with much lower costs. But two things have significantly changed since then. First, as we constantly blog about, manufacturing has become automated, with robots replacing people on the assembly line. Second, what were once low cost economies are not so low cost any more. Now it makes more sense to manufacture products in, or very near to, the markets in which they will be sold. The article goes on to then explore the implications of this for manufacturers that are “servitising” their products