China is often the destination of choice for companies that choose to outsource a portion of their business. Manufacturing is especially big in China for outsourcing. Businesses are always looking for ways to increase profits and oftentimes, increased profits can be achieved because overhead costs can be cut. Overseas sourcing and offshoring are two avenues that companies utilize to reduce overhead.
- Offshore sourcing -- utilizing the services of a company in a different country to contribute
- Offshoring -- maintaining a portion of a company in a foreign country
Offshore sourcing and offshoring are being utilized as a means for companies to reach their end goal of decreasing overhead to increase profits.
Save Your Factory, by FANUC Robotics, the word’s leading supplier of industrial robots, urges businesses to not turn to offshoring or outsourcing as a means to reduce overhead costs. Offshoring and outsourcing may seem like good solutions to cutting back on overhead, since labor can be maintained at a reduced cost; however, there are many complications involved in offshoring and outsourcing that can make management and efficiency more difficult. Examples of some of the pitfalls include:
- Supply network management difficulties
- Instabilities with foreign regulations/currencies
- Cultural barriers
Save Your Factory maintains that there are other ways for companies to reduce overhead costs while remaining in the United States—ways in which the quality of the end product will not be compromised. Two examples of methodologies to reducing overhead and increasing efficiency include:
The goals of both of the above methods are to ensure processes are efficient and are resulting in a quality end product.
Additionally, case studies and recent articles exist that support Save Your Factory’s stance against offshoring. These resources provide real examples as to why offshoring is not the best answer to increasing profits. For more information, please click here.
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