Devoted to Managers and those that seek to improve their management skills

Contrary to the press feeding-frenzy concerning offshoring or outsourcing and its affect upon U.S. manufacturing, it's not as bad as some are making it out to be. Don't get me wrong when I say this; it is going to be a continual, growing reality.

The reality though is that approximately half of the manufactures that responded to a recent survey said that they are contemplating moving a portion of their operatons offshore. A far cry from the perception that everybody is doing it now. Along with that only less than 10% are considering closing up shop and moving everything from their U.S. operations.

Denny Bolzan, principal at the private equity firm Pfingsten Partners of Deerfield Il. says "You find that companies struggle because they haven’t done it before, because the learning curve is so long, companies run the risk of delaying the realization of the cost savings or, in the worst case, not realizing any of the cost savings at all.”

Pfingsten’s Bolzan comfirms that outsourcing is not easy. “Companies do run into problems,” he says. “The sourcing learning curves can be fairly long; a new procurement skill is necessary in order to deal with different aspects of the supply chain, e.g., ordering lead times, inventory management, quality standards, payment terms, duties/tariffs, and freight.
“Issues do exist with intellectual property rights in China. Although we have not personally experienced problems, there are always bumps in the road. It takes a little bit of time. Start slow and small and low tech. Start simple and learn the process before you begin to source more complicated products.”

At this time if a company is offshoring to China for example, it takes between 6 and 9 months from start of a project to shipping it back to the U.S. market. But even that still makes the move well worth it as savings can be as high as 50%.

But if the product is a simple one and there is an already existing relationship with a Chinese factory, it can take as short as 90 day from the placement of the order to receiving of the products.

If you haven't done it before it is recommended that you hire an advisor. The benefit is to shorten the learning curve and the advisors already have relationships with foreign centers. Another option would be to work with Accenture, IBM, Hewlett-Packard among others as outsourcing providers. You can simply hand the operations side over to them with the problems and concentrate on the product.

But realize that China is only one among numerous countries that are offshoring now. Others include Costa Rica, Canada, Mexico, Jamaica, all of Central America, Czech Republic and Poland among others.
 
I believe that the advice to start small and gradually build things up as you learn the entire process is the way to go if you're beginning outsourcing. The second strategy is the partnering with the companies I mentioned above and make sure you're involved with every aspect of the process as they can teach you everything you need to know so that the next time you can do it on your own.

This is a must for many businesses. You must be patience as you deal with foreign cultures and how they operate, yet the upside of outsourcing is too great to ignore; you must be willing to take the steps to get there.