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Manufacturing Operations Returning to the U.S.
As a followup to - The Prohibitively High Cost of Outsourcing
As a followup to - The Prohibitively High Cost of Outsourcing
Many American companies are finding that outsourcing does not pay, and as a result are increasingly moving production back to America in a phenomenon known as “back shoring.”
According to strategy + business, many manufacturers that rely on high-end technology are ceasing production in Asian and the Pacific regions and moving their manufacturing processes back to America, realizing that manufacturing in low-cost nations is not all that profitable.
Concerns over shipping costs, intellectual property theft, the rising cost of raw materials overseas and lack of responsiveness to customer’s needs have all contributed to growing “back shoring” trend.
The latest company to decide that outsourcing does not pay is automated tell machine manufacturer NCR Corporation of Georgia. The company recently decided not to renew outsourcing contracts in China and East Asia and instead upgraded domestic facilities to reopen.
“I think you’ll see more of this occurring,” Peter Dorsman, NCR’s senior vice president in charge of global operations, told strategy + business. “You’ll see a lot more people returning manufacturing to America.”
The top reason companies outsource production remains cost-savings, according to the survey. However, a recent study contradicts those findings.
According to a report released last April by Compass Management Consulting, more often than not companies overestimate the savings that will come from outsourcing production by failing to account for the loss of productivity that comes with moving production out of house.
The report found that while a company may pay approximately 40 percent less in payroll costs by moving production to a low-wage country, that move also comes with a 60 percent drop in production, on average.
But not all companies are following the lead of NCR Corporation and a few other patriotic American businesses such as General Electric and Dow Chemical Company, both of whom have “back shored” production recently. The prevailing wisdom is still that outsourcing is profitable and in the best interest of a company financially. One U.S. Senator, however, has introduced legislation to ensure that it is more profitable for all American companies to manufacture domestically.
Legislation currently tied up in a Senate committee could help to end the epidemic of outsourcing in America. The Patriot Employers Act would provide financial and tax incentives for American companies to keep jobs in America.
"Americans have had enough with a corporate culture that rewards bad behavior and ignores the average worker. While some companies look for ways to avoid their responsibility to employees, others stand out for how they treat their workforce. It is time for Patriot Employers to be recognized for doing right by their workers, customers and shareholders," The bill’s sponsor Sen. Dick Durbin (D-IL) said in the statement at the time the legislation was introduced.
According to strategy + business, many manufacturers that rely on high-end technology are ceasing production in Asian and the Pacific regions and moving their manufacturing processes back to America, realizing that manufacturing in low-cost nations is not all that profitable.
Concerns over shipping costs, intellectual property theft, the rising cost of raw materials overseas and lack of responsiveness to customer’s needs have all contributed to growing “back shoring” trend.
The latest company to decide that outsourcing does not pay is automated tell machine manufacturer NCR Corporation of Georgia. The company recently decided not to renew outsourcing contracts in China and East Asia and instead upgraded domestic facilities to reopen.
“I think you’ll see more of this occurring,” Peter Dorsman, NCR’s senior vice president in charge of global operations, told strategy + business. “You’ll see a lot more people returning manufacturing to America.”
The top reason companies outsource production remains cost-savings, according to the survey. However, a recent study contradicts those findings.
According to a report released last April by Compass Management Consulting, more often than not companies overestimate the savings that will come from outsourcing production by failing to account for the loss of productivity that comes with moving production out of house.
The report found that while a company may pay approximately 40 percent less in payroll costs by moving production to a low-wage country, that move also comes with a 60 percent drop in production, on average.
But not all companies are following the lead of NCR Corporation and a few other patriotic American businesses such as General Electric and Dow Chemical Company, both of whom have “back shored” production recently. The prevailing wisdom is still that outsourcing is profitable and in the best interest of a company financially. One U.S. Senator, however, has introduced legislation to ensure that it is more profitable for all American companies to manufacture domestically.
Legislation currently tied up in a Senate committee could help to end the epidemic of outsourcing in America. The Patriot Employers Act would provide financial and tax incentives for American companies to keep jobs in America.
"Americans have had enough with a corporate culture that rewards bad behavior and ignores the average worker. While some companies look for ways to avoid their responsibility to employees, others stand out for how they treat their workforce. It is time for Patriot Employers to be recognized for doing right by their workers, customers and shareholders," The bill’s sponsor Sen. Dick Durbin (D-IL) said in the statement at the time the legislation was introduced.
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