Offshore outsourcing is a strategic practice that can be defined as the system of integrating with an external organization and allocating that organization to carry out some of your business roles. https://www.taskus.com/glossary/offshore-outsourcing/ Outsourcing can be defined as designating the use of goods and services produced outside the enterprise. https://www.entrepreneur.com/encyclopedia/outsourcing Offshore means abroad. When outsourcing is done in another country other than the own country its knows as offshore outsourcing. offshore outsourcing provides organizations ingress to high quality services at lower costs.
The united states inaugurated in a revolution which separated it from the British crown. Considering the political view America consists of a divided government. The divided government uplifts the fact that businesses are commercialized in America.
Offshore outsourcing created a negative impact in united states as it has created long term structural unemployment in America. Since 2000 the U.S. has lost 5.5 million manufacturing jobs The increasing unemployment is some countries is blamed on outsourcing as it decreases the number of jobs available to the people in a particular company’s home country. When an industry moves offshore not only knowledge is lost but also the manufacturing capacity is also lost. As an example united states was the leader in solar cell manufacturing but most of the solar technology companies built new plants in other countries like Germany. As a result, manufacturing capacity is gone and if united states ever wanted to deport these types of industries it would take many more years to restore manufacturing equipment and train new engineers. https://www.investopedia.com/financial-edge/0312/4-ways-outsourcing-damages-industry.aspx Fixing an immigration law ,reforming trade policies, Re writing the tax codes can be given as solution to this prevailing problem of outsourcing. http://www.seattlepi.com/news/article/A-few-simple-ideas-to-stop-outsourcing-loss-of-1121682.php
presently United states still involves in offshore outsourcing. Since the year of election according to the department of labor US has lost up to 10269 jobs due to outsourcing by the top 100 federal contractors. http://dailycaller.com/2018/01/29/president-trump-has-not-stopped-federal-contractors-from-outsourcing-american-jobs-will-he-start/. Donald Trumph president off the US warned that the companies will have to face consequences for outsourcing jobs abroad. Also he stated that his administration would 35 percent import toll on goods made by American manufacturers that moved jobs offshore. http://www.abc.net.au/news/2016-12-02/trump-warns-of-consequences-for-us-companies-sending-jobs-abroad/8086536 . This proves that America is engaging in numerous policies to safeguard the workforce within the country.
Somerset furniture company was established in 1957 in Randolph county, Virginia. Somerset manufactures large medium priced fancy home wood furniture such as bedrooms, cabinets, tables and chairs etc. This company was generally considered to be an innovator in furniture manufacturing processes. The company was a pioneer in manufacturing furniture and also in applying TQM principles to manufacturing furniture. Somerset pays more attention on their customer service. They believe that late deliveries to its customers would harm its credibility and as a result would lead to cancelled orders and loss of customers. In order to prevent this the company has a policy of delivering goods in time. Also the company has a policy of rapidly introducing new product lines every few years.
Supply chain management is also known as logistics network. Supply chain management can be defined as a set of approaches used to efficiently integrate suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities to the correct destinations at the correct time and so as to minimize total system cost subject to satisfying service requirement. A genuine SCM can increase revenues while decreasing costs and impact a company’s bottom line.
Somerset considers the advantage of transferring the manufacturing process to china in order to decrease their costs. Initiating manufacturing plants in different countries like china reduced costs due to the use of economical foreign labor. Due to global supply chain management somerset was able to handle costs by transferring their global production line in a foreign land they wished to operate. This provided more opportunities to save money. Even though Global supply chain management provided many advantages it provided many disadvantages such as long lead times which makes it difficult for the company to meet sudden demand spikes and special orders. It takes a long time for a manufacturer to source raw materials from the supplier, ship finished goods to the wholesaler and finally to ship the goods to retailers in the global supply chain. In contrast when the producers, wholesalers and the retailers operate in the same country the time decreases. https://bizfluent.com/about-5122848-disadvantages-global-supply-chain-management.html
Unilever can be taken as a best example for a company that follows global supply chain. Unilever is a british dutch multinational consumer goods company. Its products include foods, beverages,cleaning agents and personal care products etc. according to unilever , supply chain plays a main role in getting their goods to customers and consumers from sourcing raw materials to manufacturing and delivering the final product.
Somerset faced many thorny problems in the mid 1990’s such as increasing foreign competition, high labor rates and diminishing profits etc. Thus the company dent the domestic manufacturing facility and labor force by outsourcing several product lines to china. This guided the company to be successful in increasing dividend and reducing costs. By 2000 somerset closed its entire manufacturing facility in America and outsourced all the manufacturing to suppliers in china.
Setting a manufacturing chain in china can be preferable in many ways. One of the main advantages of outsourcing can be authorizing companies to cut operating costs. As an example the cost of training can often be cut into profits. Also lower wages are a part of this benefit. For an instance the average labor rate for manufacturing furniture in US ranges between 9 to 20 dollars per hour whereas the average labor rate in china is 2 dollars per day. Cheap manual labor is also another benefit in outsourcing. Manpower can be taken as the most important recourse in a company. Depending upon the labor force of the product outsourcing to china can reduce costs between 30 to 80 percent. This will lead the company to lower the cost of production rapidly. Expansion capability is another benefit. Outsourcing manufacture of a new product helps to get to market shortly than building an own factory, obtaining necessary equipment and hiring employees. Furthermore, it brings production closer to Asian and European market. Having a manufacturing team based in china leads to diversification of business which can be taken as another benefit. Mass market which is also another benefit makes it easier to sell end products at the Chinese market. This helps to expand the global foot prints of a business and leads to massive growth. Also this gives access to the Asian market which is growing at an incredible rate. Low quality materials, copyright issues, language issues and quality control are some disadvantages that has occurred due to outshoring. The main issue faced by companies in china is quality control. Eventhough the final product appears impressive on the surface many standards differ from American ordinances. As the IP law is very different in Asia a company has to be very careful regarding the copyrights. Also most Chinese aren’t fluent in English so the business operations can be obstruct if neither speaks a common language. http://baysourceglobal.com/the-pros-and-cons-of-outsourcing-manufacturing-to-china/
Somerset faced many challenges such as foreign competition, shipment of raw materials and inconsistency of product quality, poor transportation management and distribution network, Ineffective order management etc.Due to high competition somerset had to outsource its manufacturing plant to china. manufacturing plants produces furniture products by hand. This is not only time consuming which takes 60 days to complete but also causes irregularity of a products quality. There is a small doubt that Somerset and the Chinese manufacturing plants may not have required information technology to ensure the quick trade of data demand and supply. https://www.ukessays.com/essays/management/economic-globalization-and-offshore-sourcing-management-essay.php