Competitive pressures affecting bottom-line profit margins have risen dramatically in today’s global economy. As a result, an increasing number of U.S. companies have turned to outsourcing of goods and services to reduce manufacturing and operational costs.
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Although international supply chain outsourcing has long been the arena of large, established international corporations, research suggests that many U.S. companies that fall into the category of small to medium-sized enterprises are also building vast, international supply chains to compete against their larger counterparts.
In many cases, the focus on operational cost saving vs. attention to quality and supply chain compliance has seen more and more companies looking for supplier opportunities in emerging and fast-growing markets. Notably, a PricewaterhouseCoopers survey report released in 2011 indicates that 76 percent of companies dealing with these markets cited corruption as the prime factor of noncompliance.
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Reshoring to avoid foreign supply chain risks
Instability and uncertainty are an inherent part of doing business offshore. Companies have experienced intellectual property theft, political instability, unfair laws and regulations, unreliable suppliers etc as mentioned in the article.
However, companies that adopt a more comprehensive total cost analysis are finding that the “hidden costs” of offshoring often counterbalance any remaining savings from cheap price or labor abroad. These companies are investing and sourcing in the U.S. because it makes good economic sense for them to do so.
The Reshoring Initiative Can Help In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the not-for-profit Reshoring Initiative’s free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm
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