Outsourcing has become something of a dirty word for many people, but companies in the manufacturing sector know that there are considerably more factors at play than staunch critics of the practice often realize. Offshore manufacturing is a supply chain strategy like any other, and for many companies, it's an essential tool for operating at the highest levels of efficiency - it may even be critical for remaining viable as a business.
It should be clear, then, that to simply vilify outsourcing is an untenable position. To put such defined borders around manufacturing best practices is to hamper many companies' ability to achieve operational excellence. Instead, it may prove much more productive to observe how offshore practices are impacting the global manufacturing market and reshaping businesses.
When is a company no longer domestic?
In the current, highly fluid manufacturing landscape, characterized by a globalized distribution supply chain, the question arises: Does the term "domestic" hold the same relevance it once did?
Manufacturing.net Managing Editor Joel Hans recently tackled this question in a column for the publication - specifically, in relation to American auto manufacturer Chrysler. He noted that while "the idea of any one car company belonging to a particular nation is a little outdated," Chrysler presents a particularly complex example. The company has been owned by the Italian firm Fiat since 2011, but it has an even greater percentage of United States-based plants than its competitors Ford and GM. Meanwhile, foreign auto makers are establishing quite a few plants of their own in the U.S.
"All of this proves that there's no distinct line between a company that is considered 'American' and one that isn't, particularly when it comes to jobs or economic impact. And that may be a good thing for Chrysler's future," Hans wrote.
Energy costs and the benefits of nearshore manufacturing
Ultimately, Hans' discussion highlights that the breaking down of the distinction between foreign and domestic manufacturing companies may prove to be fruitful for the industry. He noted, for instance, that the acquisition of Chrysler by Fiat has helped the Italian firm's "languishing operations."
But global economies bring with them other issues, and energy sourcing is one of the most pressing of these. In a column for The Conversation, business expert John Bryson and ecology researcher Rachel Mulhall discussed a recent trend in which manufacturing firms based in the United Kingdom are moving from offshore to nearshore production due to rising energy costs at foreign plants.
In light of these complexities, overly simple assessments of the relative benefits of offshore and domestic manufacturing are unlikely to tell the whole story.