Evaluating U.S. Manufacturing Outsourcing To China

2523 words - 10 pages

For many years, companies in America have been outsourcing some their manufacturing operation in order to minimize the cost in their supply chain. Particularly, China has always been a major attractive outsourcing destination mainly due to low labour cost (Capgemini & Prologis 2008). Initially, it was the rapid expanding economy that made it an ideal location for outsourcing labour intensive manufacturing operations. Generally, the Government of this country has always made significant efforts to develop outsourcing facilities and logistics infrastructure that elevates its prospects of acting efficiently as an outsourcing hub. These actions, coupled with low labour cost which apparently is of high quality, is precisely what made many US firms prefer it over other outsourcing destination (Zhou 2007). However, as result of its economic growth, which consequently has had an impact on cost of doing business in the location, its attractiveness as an outsourcing destination is progressively declining. Particularly, it is the increasing cost of labour and the strengthening of the local currency (Yuan) over the US dollar that are presenting these challenges. Similarly, according to BCG, report some US states are proving to be more attractive due to their low manufacturing costs (Supply Chain Digest 2011).
Benefits of Off-shore sourcing to China
Offshore outsourcing is commonly used as synonymous of Global outsourcing. It can be simply defined as the shifting of certain manufacturing operations to different countries for various purposes including; reducing production cost, increasing manufacturing efficiency, and/or adequately serving a targeted market, just to mention a few (Mohuddin, Su & Su 2010). According to study conducted by Bronfenbrenner & Luce (2004), most firms in the US outsource their production operation to mainly offshore destinations such as China and India, and near-shore destinations in the Latin America, particularly Mexico. Offshore outsourcing to China has been a global phenomenon. The country has not only attracted US firms, but evidence points out it has also attracted firms from Europe, Australia, Canada and those in the nearby Asian countries. Firms in its counterpart Asian countries will outsource their operation in this country for different reasons as those in the US. On the other hand, European, Canadian, and Australian firms outsource their manufacturing operation for the same reasons as those in the US (Bronfenbrenner & Luce 2004).
Already authoritative studies have categorically pointed out that offshore outsourcing contributes significantly towards increasing market value. It benefits the firms outsourcing its operation, as well as its customers. To the firm, it adds value by enabling production at lower cost while at same time supporting performance improvement. Consequently, the customers or end-users get to enjoy high quality products at relatively cheaper cost (Mohuddin, Su & Su 2010). Specifically,...

Find Another Essay On Evaluating U.S. Manufacturing Outsourcing to China

Design a program that structures incentive pay and links it to a China manufacturing SME's organizational strategies and effectiveness

1236 words - 5 pages based on patented technology or process expertise developed over many years. Entering China typically requires that they transfer this intellectual property (IP) in some form to the local market. Given China's lack of legal protection for IP rights and track record of IP abuse, the risk that a company's "crown jewels" could be compromised is high. For an SME, this leakage could deal a fatal blow.Another risk arises from the fact that SME management

Exploring the Benefits of Outsourcing Essay

2285 words - 9 pages profits and hones the competitive edge businesses ultimately strive to achieve in the global marketplace. The outsourcing of manufacturing jobs can improve productivity in U.S. businesses that produce information technology (IT). For example, the outsourcing of Dell computers to be manufactured in China resulted in telecommunications price reductions of 10-30%. This raised productivity by allowing Dell IT products to be purchased for lower

Outsourcing as a factor in the United States recession

935 words - 4 pages creation. The bag that Sackaroo made were cheaper to make in China then ship to America, but the owners, Sue Burnett and Paula Casey, decided to make the bags in the U.S. despite the increased economic pressure. The pressure cause by the decision to manufacture in America made it more difficult for Sackaroo to compete with the companies that had outsourced the manufacturing of their bags. The unbalanced nature of United States outsourcing has


979 words - 4 pages always had the philosophy that we should build vehicles where they are sold, so it makes sense to have suppliers close to your manufacturing operations". BMW is another car company that manufactures in South Carolina and currently employs 14,000 people with over 200 suppliers in the U.S. (Wuorio).Over the years outsourcing has become very popular. There are many advantages and disadvantages when it comes to outsourcing, it can help reduce costs and

Outsourcing, Good for Business?

825 words - 4 pages States and China, as well as many dependent countries to overhaul their outside operations. The loss of internal manufacturing is a problem due to the reason that, when manufacturing is outsourced, we lose the knowledge and capacity that come with it, which sets us at a disadvantage. As touched on earlier, outsourcing has resulted in the loss of intellectual capital. Jobs that are crucial to the progression United States’ economy are being outsourced

Outsourcing and the US Labor Market

1684 words - 7 pages replaced by cheaper labor in China and India leaving some Americans jobless (Ahmed 192; Stephanie para 1). It is estimated that by 2015, 3.3 million U.S. service and manufacturing jobs will have been shipped overseas. Furthermore, studies suggest that 11% of U.S. jobs risk being outsourced (Zhang 776). Although it is true that some jobs are at risk of outsourcing, many jobs have to stay in America. The jobs under risk of outsourcing are those that

Outsourcing Plan

1269 words - 5 pages Outsourcing Plan Outsourcing has become the norm in today's business world. Many might argue that outsourcing is not done just because of financial savings and gains, if managed correctly the company can cut labor costs and increased profits. This paper will discuss an offshore outsourcing plan for Riordan Manufacturing that will decrease cost and increase productivity. Riordan has decided to use a new strategy for the company

For the Love of Money

2322 words - 10 pages comparison to their U.S. counterparts, factory workers in China are paid substantially less. The average hourly rate for a factory worker in China is about $1.36 (Kavoussi) or 8.23 Chinese Yuan. On the other hand, average hourly rate for an American factory worker is $24.64 (Table B-3). Due to this notable difference, a company’s profits increase significantly with the use of outsourcing, which contributes to a greater amount of money invested in

The Outsourcing Trickle

1302 words - 5 pages that globalization of products “are creating new markets [in India and China] for goods and services,” increasing government wealth (Cooper). Unfortunately, proponents of this argument fail to recognize that globalization benefits are not trickling down to all sectors of the U.S. economy. Recent studies show that lost manufacturing jobs, the sector most affected by outsourced jobs, are replaced by lower-paying jobs in the service sector (Cooper

Analysis of Economic Affect Towards Outsourcing

1984 words - 8 pages . Apple’s former CEO Steve Jobs was once so proud to declare that the iPhone and all Apple products were made in the USA, but as the demand for production increased, manufacturers were unable to keep up with the high demand. In the article “How the U.S. Lost Out on iPhone Work” written by Charles Duhigg and Keith Bradsher, the authors discuss how Apple made the difficult decision to begin outsourcing. A former executive talked about how Steve Jobs

Outsourcing: Staying Competitive In The Global Market

1722 words - 7 pages States. However, there are cultural differences between the United States and those countries in which provide outsourcing services. These countries, such as India and China, tend to have a more relaxed attitude to privacy, which can lead to serious consequences (Pruitt, 2004). Companies that decide to outsource need to have measures in place to ensure that confidential information is handled properly. "Companies are advised to train staff

Similar Essays

Strategies To Entry China Manufacturing Market

3546 words - 14 pages culture norms. Company must anticipate how these factors may affect the future of the home company so as to "develop appropriate strategies and operating styles". (Deresky, 2002, P. 11)Figure 3.1 An Open Systems ModelAdopted from: Deresky H. 2002, International Management: Measuring Across Borders and Cultures, 4th ed., Prentice Hall: New Jersey, P.10.For a Malaysia manufacturing company, or any of the manufacturing company in the world, China is one

Morality Of U.S. Corporations Outsourcing American Jobs To Foreign Countries

2114 words - 8 pages This paper argues the morality of U.S. Corporations outsourcing American jobs to foreign workers in other countries as well as the same corporations importing foreign workers to replace large numbers of their existing U.S. employees with lower wages and reduced benefits. The greed of American corporations is discussed and the impact their actions have on the U.S. economy and its citizens. The moral theory of Utilitarianism is examined to

Riordan Manufacturing Move To China Campaign: Explain Possible Issues Related To Relocating More Manufacturing Operations To China And Downsizing The Workforce

6097 words - 24 pages employeesPR Campaign's Affect on Marketing FunctionRiordan Manufacturing has to keep the company reputation in mind in the process of moving manufacturing from the Albany, Georgia plant to China. How will the company keep from losing employees during the downsizing phase? How will the community react to the outsourcing of jobs? Will they lose customers and/or suppliers during the process? These are questions that Riordan has to tackle in the PR

To What Extent Was The U.S.'s Involvement In The War Between Japan And China Which Caused Japan To Attack Pearl Harbor

1610 words - 7 pages and 1941, the conflict between China and Japan started to escalate rapidly which caused the U.S. to change relations with both nations which contributed to the United State leaning forward to the idea to initiate a full out war with Japan and Germany. (History.com) (3) U.S. senators observed the growing developments in China as a chance to make a move to gain benefits for themselves. The U.S. treated the Japanese with a