tion, given all this, has become beyond shaky and may be
nearing unsustainability.
AND THERE’S MORE …
That three-legged stool ought to be enough to scare any
executive straight, but just in case, here are a few more
potential perils of offshoring:
▪ Too many spoons in the soup. The globalized supply
chain can have a couple of dozen touch points, considerably
more than its domestic predecessor. That’s a significant
increase in opportunities for things to go wrong. Right,
Professor Murphy?
▪ Quality degradation. Labor cost savings might simply
not be worth it if quality is not as high as it should be.
▪ Theft. Not necessarily what we laughingly call “shrink,”
but the appropriation of intellectual property, which does
not seem to be either a crime or a sin in some cultures. So,
how important are your designs, your patents, your points
of product differentiation? How much or little damage does
it do to your brand to have knock-offs produced and sold
locally? Or your proprietary techniques, features, technologies, and designs made available to your competitors (who
are also dealing with your offshore producers)?
▪ Diminished control. Face it. You no longer have, in many
cases, much direct contact with and influence over the individuals who make your goods (nor with their management).
▪ Fines or jail time. Or rotten publicity and global disap-
probation. When your offshore supplier (or its supplier,
service provider, or other business partner) does something
that is illegal under U.S. law, or international law, or engages
in distributing baksheesh, or operates inhumane sweat-
shops, or brutalizes child labor, you are going to take major
heat at best, possibly face major fines and penalties, or …
How attractive is the Lorelei of offshoring continuing to
look? Is low-cost labor still as alluring as a well-performed
tango in Buenos Aires’ La Boca?
WHERE TO GO FROM HERE
First, realize that the only defensible long-term reason to have
a globalized supply chain is that it must be done in a rational
and strategic context in support of organizational strategy
that balances sourcing, manufacture, and distribution activities serving worldwide markets. Anything less is short-sighted, subject to deterioration, and possibly dangerous.
Second, begin with a clear-eyed assessment of options
and alternatives to serve domestic or a selected few out-of-country markets.
Is reshoring at all realistic to consider? Are the requisite
skills still resident? Can they be imported or trained? Are any
dies needed in good repair? Can they be rebuilt and maintained? Can you commit to the time and investment of
reconstructing a distribution network that is driven from a
“new” point of product origin? Will you be able to, and are
you willing to, acquire temporary talent and outside service
providers to plug any gaps? Even with thorough and creative
business cases, will the cost/price gap with competitors be
small enough to create a value proposition for customers?
Fine point: If the original home base won’t work, are
there other in-shored locations that might?
Do you have the guts and the financial resources to get
through short-term tough times in the interest of realizing
long-term good times?
What are the nearshoring alternatives that split the difference between distant offshoring and reshoring, balancing the labor cost, transport costs, and distribution network
investment to provide a cost-competitive solution? One (or
more) that overcome(s) some of the other downsides of
distant offshoring, including quality, productivity, loss of
control, international law exposures, and replenishment
cycle time length and reliability?
Are there distant offshoring options that overcome,
reduce, or mitigate risks of present arrangements? Do they
introduce new risks? What are the trade-offs?
Can you collaborate with another company with off-shoring/outsourcing solutions that might make your combined network more cost/quality/productivity/reliability
attractive—and effective?
There’s probably a lot more, but these few points ought to
be enough to get you started. As usual, it is never as easy as
we’d like to believe.
The third major step is to translate what you found and
learned into a plan—actionable, with clear accountabilities,
focused on quantified business objectives, practical, with a
manageable time frame, supported by advocates, champions, and sponsors.
Look, this is not a mindless, jingoistic pipe dream. It is all
about sustained enterprise performance, long-term profitability, practical actions for competitive advantage, and
getting outside the box on knee-jerk searches for low-cost
labor for its own sake.
Go for it. And good luck. We have a lot at stake in what
you decide. ;
Art van Bodegraven, practice leader at S4 Consulting, may be reached at (614)
336-0346 or avan@columbus.rr.com. You can read his blog at http://blogs.dcve-locity.com/the_art_of_art/. Kenneth B. Ackerman, president of The Ackerman
Company, can be reached at (614) 488-3165 or ken@warehousing-forum.com.
