Is offshoring ever good?
What are the so-called benefits for a company that offshores? More importantly, what are the dangers?
Why companies go offshore
Mostly, offshoring occurs in order to reduce wages related to folks on an assembly line. In these cases, the only winners are the owners of the company. Yet this form for "profitizing" is a double-edged sword.
When offshoring industrial products, workers are usually not required to think - they probably aren't even encouraged to do so. But because wages are cheap, production efficiency doesn't have a high priority. Alas, failure to empower your assembly line to think causes quality problems to remain unnoticed too long. And there will be no manufacturing innovation whatsoever.
How offshoring can kill innovation
Innovation is not invention - although it builds on inventions and the related best-practices that evolve. Specifically, innovation means solving a problem. Here's an example of assembly line innovation. A woman ran a machine that stamped out rubber parts from a flat mat that was fed into the cutting die. Looking around the production hall, she noticed that her machine was the bottleneck - it was the single slowest operation. She also noticed that the die travelled 6 inches each time a new sheet of rubber entered. Yet the rubber was only 1/4 inch thick. The travel time was considerable, as were the security measures that prevented fingers from getting caught in the machine. She suggested reducing the travel to about 1/2 inch. This was done and total production for the facility increased by over 70%. True story.
Alas, most employees just do what they're told and don't ask questions or suggest improvements. So much for in-line innovation.
Offshoring and agile development
Successful offshoring (and outsourcing) also requires the original manufacturer to specify details to an incredibly minute degree. The specification alone can take hundreds or thousands of man-hours. Yet in most instances, this document only serves as a legal cover-my-ass tool when litigation arises because something is not done correctly, not an instrument designed to promote efficiency.
In software development, "agile" is currently the method of choice if you're really interested in benefiting from the combined wisdom of your team. Most offshoring/outsourcing models don't allow this, which is why the Ukraine, Romania, and India, are generally awful choices for offshoring of software development, not because of the quality of the work, but because of the lack of feedback and dialog. You want a team that thinks and spots errors in the specification, not one that just follows orders. And ideally, one would think that low-income countries would be better off building their own economies instead of fostering a community of wage slaves.
How to kill a brand
Brand is another issue. Today, Burberry in the UK has offshored all of its clothing production to China, with the exception of its famous trench coats. Georg Jensen “Danish” jewelry is made in Thailand. Even the iconic American Radio Flyer "little red wagon" is now produced in China - and 45 former employees in Chicago are out of work.
Will I buy another Radio Flyer? No. Today, it’s just more plastic junk from China; the brand has been devalued and no longer represents an American company.
Should I buy an expensive Georg Jensen ring from a high-street shop? Or should I travel to Chang Mei and buy one on the street from the same worker who toils at Georg Jensen during the day and files and hammers at home during the evening. “Royal Copenhagen” china is also made in – well – not China, but Thailand.
I'd be interested to hear from folks who can tell me when offshoring is truly in the interest of the company and their customers.