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Jeff Rowe
Jeff Rowe
Jeffrey Rowe has more than 40 years of experience in all aspects of industrial design, mechanical engineering, and manufacturing. On the publishing side, he has written well over 1,000 articles for CAD, CAM, CAE, and other technical publications, as well as consulting in many capacities in the … More »

Offshoring – Anger or Fear?

January 6th, 2012 by Jeff Rowe

Whenever the topic of outsourcing manufacturing to overseas companies or facilities is brought up these days, a fact of business life called offshoring, you usually get one of two reactions anger or fear. Sometimes you get a little of both. Is North American manufacturing headed down the road to oblivion with little ability to stem or reverse the descent? We need to view all of this from an historical perspective.

What is happening to North American manufacturing today in terms of gross numbers of employees is hardly unprecedented. Historically, probably the best analogy to what is taking place in manufacturing today with regard to reduced numbers and overall effect is agricultural farming. In the U.S, between the years 1890 and 1960, the percentage of the job market that was directly tied to the farming sector dropped from about 45 percent to less than two percent. Automation on the farm did not just make the jobs flee to other countries; it made them completely disappear. Even with much lower employment numbers, the farming sector thrived in terms of productivity. Automation helped make farming more productive than it ever was when it was strictly the province of human hands and manual labor and today we enjoy surpluses that allow us to usually export huge amounts of farm goods. When jobs vanished on the farm, people turned to the emerging industrial sector for employment and a new way of life in cities.

Just as industrial manufacturing replaced farming, today in the world economy, services are replacing manufacturing.

There are major differences, however, between how offshoring has affected and will continue to affect both manufacturing and service jobs. Offshoring of manufacturing jobs affects primarily blue-collar jobs in certain industries, whereas offshoring of services affects primarily white-collar jobs across potentially all industries.

Luckily, not all manufacturing or service jobs can be outsourced or offshored because several criteria must be met, including:

  • Little face to face customer contact
  • Information is a major component of the product
  • Work can be done via remote communications
  • Low set-up barriers
  • High wage differentials

So, while some consider offshoring a necessary evil to North American manufacturing and service workers, their employers are discovering that an the opposite force, known as reshoring, is an essential component of helping their businesses not only thrive, but in many cases, survive.

Because it is such an important emerging movement, reshoring will be the topic of an MCADCafe blog post in the very near future.

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One Response to “Offshoring – Anger or Fear?”

  1. Mike LaCroix says:

    I have never really understood the reasoning behind “Off-shoring” of jobs other than if Big Company A is doing it then we need to do it too. As a worker of significant age I have seen and lived through the out-sourcing era. What bothered me the most was that most companies were sending jobs overseas without doing any detailed analysis as to whether this was the best thing to do or not. I know of many companies that outsourced the manufacturing of products to another market (China, Mexico, etc.) only to find that in the end the cost of manufacturing wasn’t any better than making it at home. One company I worked for moved its manufacturing to Mexico to save labour costs (which it did) but due to the skill of the work force the company was forced to put in extra equipment to ensure the workers were actually doing their job and based on the life time of the product the extra machinery wiped out the savings. Currently I am working with a company that due to costs are having the products made in China. And while the actual cost of the components are less than here in North America it is requiring a full time person going their to monitor their work plus the cost of a local to help that person get around. Without the monitoring the quality is not there. They also found out that China imposes a fee/tax on every item that enters or leaves the country which is adding to the cost let alone the added cost to ship the product to North America. As for the off-shoring of service jobs (ie. Customer support – phone and online, call centers, etc.) again it was to save money but over the last several years there has been a backlash against this by the customers. The companies were finding out that customers were frustrated by the intelligibility issues when conversing with a person half way around the world or the time delay problems due to the long distance. I personally know people who left companies due to this practice as it was frustrating when getting help. I won’t ever sign up with my local phone company until they remove their customer service back to North America from India. As for the “reshoring” of jobs, I think that is the result of the current economic climate that has many people out of work and that most jobs that do become available are low paying service jobs working for places like McDonalds and Wal-mart which barely allow a family to live. This is forcing the US government to make changes to entice companies to bring the jobs back home. Once the economy turns around I think you will see that practice slow down or come to a halt. It will be interesting to read your thoughts on that subject.

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