Off shoring and reshoring
Reshoring
Transferring a business that was moved overseas back to its original country
Advantages of reshoring
- Foreign manufacturing is all about offering the cheapest solutions on the market - cheap labor, cheap tools, cheap technologies, and cheap processes. - Reshoring allows for greater control of production processes.
Disadvantages of offshoring
- The biggest criticism versus companies that offshore is that it increases the level of unemployment of the local economy. companies argue that by offshoring they are able to improve profitability by lowering costs and increasing revenue. Thus, the increased profits can be used to improve facilities and programs of the principal company. - The client will be immersed in the culture and social practices of the host country. This may have an effect on productivity and communication. Unlike outsourcing, time zone differentials may work against the offshoring company because production could end up being delayed due to changes in manpower availability. - cultural and language barriers
Advantages of offshoring
- potential for cost savings. Any business which has significant staffing costs in a particular department that has potential to be off-shored, may benefit by offshoring this section of the business. - When a company sets up office or a factory abroad, it is not just capitalizing on comparative cost advantages on labor but also on existing economies of scale. Other cost items such as power, Internet connectivity, rent may be lower in the host country than the country of origin. A company can also take advantage of the comparative cost advantages by diversifying positions or negotiating for volume discounts when purchasing assets or services. - There are some governments that grant special exemptions and incentives to companies that invest in their economy. These include tax exemptions and access to cheap credit which could improve the bottom- line of the business.
Off shoring
Occurs when a business relocates production to another country
