Production offshoring consists of physically relocating some or all of your manufacturing processes to another country. This became popular in the last few decades as labor costs in countries such as China, the Philippines, and India were cheaper than those in the United States.
There are a lot of factors that have changed since offshoring became popular. As such, it is important to consider the advantages and disadvantages of offshoring before deciding whether it is a good business decision for your company.
Advantages of Offshoring:
- Access to Skilled Labor: Offshoring your production means that you have access to a greater pool of skilled labor. You have the opportunity to choose to offshore in regions that have particular expertise for your types of operations. You may also have the ability to access and implement new technologies to make your production more efficient.
- Development of the Business: When offshoring operations, you are able to free up the workload on your current employees. The company managers are able to use more of their available resources to focus on other areas of the business. This can then allow companies to expand the range of services or products they offer.
- Reach New Markets: When you are offshoring your processes to other countries, you have the ability to work closely with professionals who can help you market your products to a new audience.
Disadvantages of Offshoring:
- Quality Control Problems: Countries outside of the United States may have different rules and regulations for the quality of products being produced. This can cause problems if the countries where production is being offshored to have less stringent requirements for product quality. This can lead to products not complying with the standards of quality that are desired by the parent company.
- Rising Labor Costs: Although the initial appeal of offshoring was due to the low labor costs of other countries, recent data shows that the costs of labor in those countries are rising. In addition to the rising costs of labor, the costs of shipping and other duty fees are also on the rise.
- Security Issues: Sharing information between systems and locations increases the risk for a security breach. This could lead to data leaks or loss of data which can be costly to the company.
- Increase in Unemployment: When the physical infrastructures are moved overseas, there is a risk for the local employees to lose their jobs if they are not able to work in other areas of the company. This can negatively impact the local perception of the company if a lot of people lose their jobs as a result of offshoring.
When considering offshoring some or all of your production operations overseas, it is important to consider all of the advantages and disadvantages that come with it. Then, you will be able to make an informed decision that is beneficial for your company.
Advanced Planning and Scheduling (APS) Software
Advanced Planning and Scheduling Softwares have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS Systems can be quickly integrated with an ERP/MRP software to fill the gaps where these systems lack planning and scheduling flexibility, accuracy, and efficiency.
With APS you can:
- Create optimized schedules that balance production efficiency and delivery performance
- Maximize throughput on bottleneck resources to increase revenue
- Synchronize supply with demand to reduce inventories
- Provide company-wide visibility to resource capacity
- Enable scenario data-driven decision making
The implementation of an Advanced Planning and Scheduling (APS) Software will take your manufacturing operations to the next level of production efficiency by taking advantage of the operational data you already possess in your ERP system.
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