Offshore Sourcing

Companies are constantly looking for ways to reduce overhead costs in an effort to increase bottom line profits. Some companies have looked to offshore sourcing or offshoring to reduce costs.

• Offshore sourcing is when a company utilizes the services of a company in a different country to contribute to some portion of their business process (manufacturing, for example).
• Offshoring is the process of maintaining a portion of a company in a foreign country.

Offshore sourcing and offshoring are increasingly popular because companies see these two options as a way to decrease overhead costs, mainly labor costs. With decreased overhead comes increased bottom-line profits, which, obviously, is very attractive to businesses.

Save Your Factory, a site sponsored by FANUC Robotics, the word’s leading supplier of industrial robots, maintains that companies should not be turning to offshoring or offshore sourcing. These two options seem attractive to businesses looking for quick fixes to increasing profit, but there are complications involved with offshoring. Save Your Factory notes the following as some examples:

• More difficult supply network management
• Instabilities with foreign government/regulations and currencies
• Cultural and language barriers

Offshoring is not a quick fix, and there are numerous routes to take for a company to increase bottom line profits while maintaining all parts of a business in the home country. Lean Manufacturing and Lean Six Sigma are just two examples of methodologies businesses can use to decrease overhead costs. Both methods focus on making sure processes are as efficient as possible while maintaining the quality of the product.