Amid reshoring surge, 3 reasons why outsourcing may still be best

COVID-19 is a confusing, inconsistent virus. For those that contract the disease, the symptoms can be quite severe; for others, there are next to no physical manifestations to speak of. The efforts to control the contagion — and the best practice recommendations from medical organizations — have also been somewhat inconsistent, given the dynamic nature of a novel virus.

But what COVID has helped to clarify are the weaknesses and fragility of the global supply chain. Because virtually every country was — and continues to be — affected by the coronavirus, business owners have had to wait to receive key materials from other parts of the world to complete production processes. Demand has therefore vastly outpaced supply. This predicament helps explain why close to 85% of manufacturers say they plan on reshoring at least some of their operations in the coming years, according to a poll conducted by Thomas in early 2021. However, even before COVID-19 struck, thousands of companies decided to bring the jobs that they had outsourced back to the United States. And in 2020, reshoring activity rose considerably, with over 160,000 jobs moving to the U.S. according to the Reshoring Initiative.

All this being said, there may still be some utility in the status quo, assuming offshoring is what you're doing now. Here are a few reasons why you may want to hold the line as it pertains to your supply chain and where your parts, assembly or processes currently derive:

1. Helps reduce expenses for the business
Perhaps the biggest, most obvious positive to outsourcing is from a cost perspective. As the old saying goes, it takes money to make money and production expenses can be considerable when adding them all up, from overhead, to labor and more. But according to the International Organization for Standardization, the typical business owners saves, on average, 15% by outsourcing.

Outsourcing may be out of vogue but sticking with it may be in your best business interest.

Staunch advocates of reshoring say outsourcing winds up taking job opportunities away from Americans. But as the Congressional Research Service has discussed in a research paper, there is little in the way of conclusive evidence showing that domestic investment leads to reduced work opportunities or lower salaries.

2. Efficiency
Another potential advantage of outsourcing is in terms of work efficiency. Depending on your industry and what processes are occurring overseas, it may make more sense for those activities to take place there, where certain raw materials or expertise could be in greater supply.

In some instances, the geography or climate of the area is such that the activity or deliverable can't be done anywhere else. To take an agricultural example, this explains why a number of fruits and vegetables come from places like Florida or California, which has the warm climate that foods like oranges, grapefruits and avocados need to thrive.

3. Common among small businesses
Some are of the mind that outsourcing is solely the province of large corporations. But it's very common among small businesses as well. Indeed, according to a new report from research firm Clutch, 80% plan to outsource in 2021, if they aren't already.

None of this is to say that outsourcing is necessarily or always better than reshoring or nearshoring. But if it's working for you and your supply chain now, it may be best to avoiding fixing what isn't broken.