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Posts Tagged ‘reshoring’

Offshoring – Anger or Fear?

Friday, January 6th, 2012

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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