Re-shoring and offshoring
As the global business, competition intensifies because of certain factors such as transportation, rising cases of natural disasters, changes in the value of currency, availability and cost and availability of labour and location of customers more organizations have opted to change location of their manufacturing facilities. Some companies especially in United States are considering shifting back their manufacturing plants back ”reshoring” while other companies are thinking of relocating their manufacturing plants from United States to other countries “off shoring”.
In the past, it was not a big challenge to send jobs from United States to countries like China and India because they used to offer raw materials, real estate and labour at relatively low cost. Through close analysis of cost and benefits acquired from this strategy, most companies have come to realise that it is not cost effective, as they had thought before. A study conducted revealed that most companies are exploring to bring 20% of the offshore manufacturing capacity back to their countries by 2014 (Alberta, 2012 P. 28)
United States is recording the highest number of jobs being brought back from China while blocking them being sent overseas. In last year, only manufacturers added up to 50% jobs with companies such as San Jose, Seattle, Houston and Cincinnati seeing as the most beneficiaries. Challenges ranging from high transportation cost led by high cost of oil, high custom duties and compromised quality of products manufactured in other countries are what has led to such economic changes(James, 2011 P.112).
Developing countries have always been the target for offshore by developed countries but through education, training and skills development these countries have begun to raise its own labour able to develop manufacturing plants. Most of the African countries are now manufacturing their own products because they have realised that there are so much benefits accrued from processing goods in host country.
In order to cope with the economic challenges and improve corporate profitability, companies have decided to add jobs in destination countries to provide goods and services in lower cost lower countries while subtracting in the higher cost labour countries. This trend was common in the early days more especially in 18th to 20th centuries.Manufacturing and corporate businesses, which have, chose to send their services overseas. In the past, there was high demand of for business service jobs in other countries and low demand in the domestic market this prompted United States to offshore(Mitra,2012 P. 213).
21st century has seen a tremendous change in business world where most companies are limiting offshoring. It is projected for instance, that U.S and European based companies will no longer have Information Technology jobs to offshore countries, which they used to offshore are now venturing on building skills locally. This has led to decline in the number of jobs being off shored. United States are now changing its policies to reduce offshoring and this has led to reduction in offshoring as compared to Europe. Rather than just any kind of offshoring, the focus now is innovative offshoring in order to access and secure talent where companies seek collaborative relationships with the universities to meet their particular needs. For example, the German firms sponsor some courses, labs and provide internships among other services. This goes a long way in establishing good relationship with such institutions with aim that they will provide cheap labour (Alvin Hansen, 2012 P. 136).
Southern Alberta Institute of Technology., & Alberta Educational Communications Corporation. (2012). Shoring. Calgary, Alta: Access Network.
James, I. R., Alberta Educational Communications Corporation., Southern Alberta Institute of Technology., & University of Calgary. (2011). Shoring. Calgary, Alta.: Dept. of Communications Media, University of Calgary.
Alvin Hansen Symposium on Public Policy, Bhagwati, J. N., Blinder, A. S., & Friedman, B. M. (2012). Offshoring of American jobs: What response from U.S. economic policy?. Cambridge, Mass: MIT Press.
Mitra, D., Ranjan, P., & National Bureau of Economic Research. (2012). Offshoring and unemployment. Cambridge, Mass: National Bureau of Economic Research.