Supply chain impacted as businesses question outsourcing strategies Manufacturing companies have been sending their production operations overseas for years due to lower costs associated with having products made in other countries.

Despite the low costs of manufacturing in these countries, many companies are now realizing that the perks and cost savings they once enjoyed from shipping production operations to different countries are disappearing.

"Many manufacturers underestimated the offshore impacts of long lead times and high inventory costs," said David Johnston, senior vice president, supply chain, of JDA Software. "They are now discovering that maintaining service levels, in addition to the inventory and logistics buffering costs necessary to support the long-distance supply chain, far outweigh any labor cost advantages. In addition to higher than anticipated overall product costs, offshore production also introduces a latency lag in bringing new products to market and responding to market trends."

While bringing production back home could reduce costs by increasing supply chain efficiency, technology also offers a way to forge stronger ties among the geographically distant nodes of a supply chain. Some companies are beginning to use social media technology for supply chain management, which has proven to be helpful in forging strong business-to-business relationships among companies and their vendors, according to IT World Canada.
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