Outsourcing Times

Offshoring Manufacturing

Offshoring manufacturing for cost, like outsourcing in general, does not result in a net cost savings. This is mainly because of hidden overhead costs and because it inhibits, compromises, or thwarts 6 out of the 8 cost reduction strategies. Halfcostproducts.com reports:

When measured on a total cost basis, manufacturing offshore for sale in the U.S. rarely results in a net cost savings, considering differences in labor efficiency and all the costs of shipping, quality, inventory, communications, travel, training, transferring products, support, and complete sets of equipment needed for any manufacture.

Read more: OFFSHORE MANUFACTURING A TO SAVE COST@

Offshoring Manufacturing

Offshoring manufacturing for cost, like outsourcing in general, does not result in a net cost savings. This is mainly because of hidden overhead costs and because it inhibits, compromises, or thwarts 6 out of the 8 cost reduction strategies. Halfcostproducts.com reports:

When measured on a total cost basis, manufacturing offshore for sale in the U.S. rarely results in a net cost savings, considering differences in labor efficiency and all the costs of shipping, quality, inventory, communications, travel, training, transferring products, support, and complete sets of equipment needed for any manufacture.

Read more: OFFSHORE MANUFACTURING A TO SAVE COST@

The Great American Outsourcing Deceit

By Priya Jestin, Staff Writer

When we talk about learning the fine art of outsourcing, there’s probably no one better than our very own US President Bush to begin with. His presidency is marked by great outsourcing ideas. A recent article in the New York Times describes how the Coast Guard has run a $17 billion modernization program. The huge bill was thanks to the expertise that the Coast Guard outsourced to two of the nation’s largest military contractors. They were supposed to plan, supervise and deliver the new vessels and helicopters. And the result? Expensive ships that aren’t seaworthy.

Now that we’ve checked out the home front, let’s take a look at the international scene. They first bomb the place down and promise a good regime. Then when it comes time to help the Afghan government train a new police force, our great administrators outsourced the work to DynCorp International, a private contractor. Today, after throwing $1.1 billion into this police-training project, Afghanistan still doesn’t have an effective police-training program.

Israel’s Native English Speakers Has US Excited

While India and China may still be outsourcing hotspots, there are other countries trying to woo US firms. Israel, which differentiates itself from India and the Far East by offering a vast pool of highly educated workers who are native English speakers and share a cultural affinity with the West, is one that has attracted a lot of attention. Boston.com reports:

The heightened interest comes as the government is offering firms a $200-per-month subsidy for each worker employed by foreign companies. While Israel's workforce still doesn't come as cheap as its rivals, salaries are far less than in America. And perhaps surprisingly, all the figures for economic growth, credit ratings, and investment this year indicate the instability in Israel has not affected business at all.

Read more: US firms turn to Israel as outsourcing alternative

Rebuilding In-House Capacity Is Not Feasible, Say Australian Majors

This one’s for those who thought that this outsourcing problem was a passing phase: It is NOT. The problem does not lie with the great capabilities of the people in the country to which work is outsourced. The problem lies with the company that outsources its capability. Once a company outsources, it is next to impossible to rebuild in-house capability.

According to a Gartner study that was conducted last year, only 23 per cent of the Australian companies that outsourced managed to bring services back in-house. And the outsourcing deals today are nothing like they were in the past. This is the age of selective sourcing which focuses on getting assistance in areas where the company either faces an IT skills shortage or wants to free up staff and resources. Computerworld.com reports:

One high profile recent example is Qantas, which has outsourced internal IT applications support and maintenance. The transition will take over 15 months and Qantas will shed some 340 Australian IT staff. Qantas chief executive officer Geoff Dixon said it would require an investment of up to $100 million to develop an in-house capability, an investment it could not support.

Read more: Outsourcing a done deal with very few able to rebuild in-house capability

Deutsche Post To Move Operations To Eastern Europe

Deutsche Post AG plans to reorganize its financial operations and may outsource some of its operations to the Czech Republic and Poland. This move is expected to save 500 million Euro a year, according to Deutsche Post management. Forbes.com reports:

'We will make a decision in the next 12 to 18 months, where our accounting services in Europe are to be located,' Frank Appel, Deutsche Post manager for Global Business Services told the newspaper.

Read more: Deutsche Post to move accounting ops to Eastern Europe; save 500 mln eur a year

Privacy Concerns on Legal Outsourcing

In a recent post titled "Law Firms to Benefit from Outsourcing", I had mentioned about the benefits of legal outsourcing. Now there are some concerns over the legal process outsourcing. Outsourcing certain types of legal work to offshore destinations has become a common practice in the United States. However, there are already concerns about how it would affect issues such as privacy. By outsourcing legal work, law firms are dealing with people in another country who are not subject to the US or Canadian law. That might create many problems in future.

The overseas lawyers are not very close to the work produced. However, they remain responsible for it. Outsourcing has serious limitations, as there are several limits imposed by privacy legislation and solicitors. Another concern is regarding the authority of the client company over the offshore workers. Since they are contractual workers, the company may not be able to dictate its terms and finally end up with heavy losses.

Are You Looking to Outsource?

According to industry figures, the global business process outsourcing industry is set to be worth €140bn by 2009. Therefore, many companies are planning to take a share of that market. If your company is planning to outsource, there may be some challenges before it. The key challenges are managing growth while maintaining the high standards of customer service.

You must recruit professionals who will help you in making a right decision on outsourcing. Choosing a right vendor in the offshore destinations is not an easy task. A thorough research is required before you take the plunge.

This is an interesting post titled "Did Outsourcing Raise Level of Wages?", which was written by me a few days ago. You can read the post and give your valuable opinion.

Tax Outsourcing

Recently, I have gone through a report that tax collection services in the United States have been outsourced to third party destinations. It is said that the IRS has decided to outsource its tax collections services to private vendors.

More than 12,000 people across the country who owe taxes to the government will be contacted by private collection agencies to pay up. IRS sources believe that the plan will help the agency in recovering a huge amount of unpaid money in the coming years.

Read my previous post titled "Did Outsourcing Raise Level of Wages?" to know about the impact of outsourcing.

China into Service Outsourcing

Recently, I had written a post titled "India: Hot Destination for Outsourcing?". We have discussed a lot about India's rising fortunes in the outsourcing sector. Now, China is all set to challenge India in this field. China has unveiled a plan to enter an area that has been the exclusive domain of India for years. That is service outsourcing.

China is prioritizing it service outsourcing in a bid to boost the services industry. Experts believe that the global service outsourcing market will reach US$1 trillion by 2008. Hence, China wants to grab a substantial amount of share in that market.