The Hidden Costs of Outsourcing

“About 60 percent of the companies that offshored manufacturing didn’t really do the maths. They looked only at the labour rate – they didn’t look at the hidden costs” – Harry Moser of Reshoring Initiatives

What were some of the DISBENEFITS which followed the herd mentality of offshoring?
1. The engineers in the home country and the factory managers in China who rarely talked to each other
2. The management hours and cost of flights to China to investigate quality issues
3. Loss of skills in the home country
4. Corrosion of quality and loss of control over the full supply chain
5. Decline in innovation
6. More complex distribution channels and longer delivery times
7. Security of intellectual property

In addition, benefits were eroded because improvements in the technology of production meant that labour costs declined as a percentage of total production costs.

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