A real-life outsourcing decision has been made. How would you add to the outsour

Question

A real-life outsourcing decision has been made. How would you add to the outsourcing?

Apple around the turn of the century was moving more manufacturing jobs over to China. A lot of the times moving jobs to China is seen as Companies just trying to do reduce their labor cost, and in some cases exploit cheaper labor. Either way, the issue outsourcing jobs to china makes more sense beyond just saving labor cost. An example of this would be Apple, which manufacturers its products in China. “There is no longer an ecosystem that supports manufacturing in the U.S., there is no supply chain, there aren’t enough super low-cost workers, and there are not enough mid-level engineers.” (Blodget, 2012) Blodget points out that not being close to a manufacturing supply chain and shortage of engineers is a part of the equation for Apple’s decision. Girotra and Netessine also point out that a part of Apple’s concerns is supplier availability, engineering changes, and flexibility. (2014) The need for engineering changes and flexibility is tied with unpredictable volumes needed to produced, which the U.S. isn’t suited to handle rapid changes. (2014) Manufacturers in China can utilize thousands of engineers to make changes overnight and China’s large supply of labor allows Apple flexibility with supply needs. (Girotra & Netessine, 2014) Finally, Girotra and Netessine point out that there isn’t a factory in the U.S. that is around flexible and capable suppliers. (2014) Ultimately this will reduce shipping cost being suppliers and manufacturing is closer together, not to mention the abundance of labor and skilled labor helps meet changing supply demands, which means phones aren’t overproduced or under-produced which would affect prices, consumer perception, and increase customer dissatisfaction. These benefits sit on top of the lower cost of labor.

Explanation / Answer

Outsourcing is a big industry now a days due to cheap availability of labor and resources in emerging countries as compared to the developed counterparts.

For eg. In India many MNC Banks, BPO's and Trading desk has set up their back ends and call centres due to abundance of manpower and office spaces and they also get government aids to set up their offices and provide employment. These back ends if would have been set up anywhere in UK, US or EU would have costed the MNC much more than they are in India.

Likewise a large variety of goods are produced in China due to large supply of engineers, machineries, technological aids etc. And they have strong supply chain forces which helps in lowering costs and have large exports and even they have got a lot of outsourced work.

In short outsourcing to emerging countries can lower cost of production significantly.

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