Agenda
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Off-shoring versus Near-shoring versus Re-shoring
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Off-shoring. What is it?
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Outsourcing. What is it?
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Why Outsource?
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What has Changed Since the 90’s?
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Near-shoring. What is it?
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Re-shoring. What is it?
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What is driving Re-shoring?
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TCO – Total Cost of Ownership
Build Where You Sell
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Wal-Mart's New Mantra: Made in the USA
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Business Continuity and Risk Management
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Conclusions
Off-shoring versus Near-shoring
versus Re-shoring
 Off-shoring
 Outsourcing
 Near-shoring
 Re-Shoring
Off-shoring. What is it?
 Off-shoring – Outsourcing a business function to
another company in a different country than the
original company’s country
APICS Dictionary – Thirteenth Edition
Outsourcing. What is it?
 Outsourcing – The process of having suppliers provide
goods and services that were previously provided
internally
 Outsourcing involves substitution – the replacement of
internal capacity and production by that of the supplier
APICS Dictionary – Thirteenth Edition
Why Outsource?
 One of the major objectives for outsourcing was to
establish a presence in China, Brazil, India and other
high-growth countries with the potential to generate
huge demand for goods and services
What has Changed Since the 90’s?
 Oil prices have tripled since 2000, making cargo-ship fuel
much more expensive
 Wages in China are now five times what they were in 2000
and are rising at an annualized rate of about 20 percent
 The natural gas boom in the US has dramatically lowered
operating and facility costs. In Asia, meanwhile, natural
gas rates are four times those in the United States
 Much of the labor savings in low cost countries is trumped
by the hidden waste and overhead costs required to make
the overall supply chain function well
Near-shoring. What is it?
 Near-shoring – The practice of transferring one’s
employees or business activities from a distant country
back to a company in a nearby country, where both parties
expect to benefit from one or more of the following
dimensions of proximity: geographic, temporal, cultural,
linguistic, economic, political or historical linkages
 In the U.S. companies near-shore to Canada, Mexico as well
as many other nations in Central and South America and
the Caribbean
Re-shoring. What is it?
 Re-shoring – The practice of bringing outsourced
services and production back to the location from
which they were originally off-shored
What is driving Re-shoring?
 Shorter Transit Times
 In today’s highly customized and consumer driven
market, achieving speed to market is a competitive
advantage
 Lower Total Landed Costs
 Companies who Re-shore can find savings in accrue in
every area of the supply chain
 Improved Communications
 No 12 – 13 hour time difference
What is driving Re-shoring?
 TCO – Total Cost of Ownership
 TCO is the sum of the piece part, associated logistics
and all of the soft costs inclusive of the decision to
source an item in a specific geography
 Build Where You Sell
 Manufacturers are reinvesting here to more efficiently
serve the world’s largest free market
 Business Continuity and Risk Management
Wal-Mart’s new mantra: Made in the
USA
 Wal-Mart's new mantra: Made in the USA
Industry Week
Wal-Mart U.S. President Bill Simon has announced the
retailer is looking for domestic manufacturers to
produce its patio furniture. Wal-Mart has promised to
buy an additional $250 billion in U.S. products over the
next 10 years
Business Continuity and Risk
Management
 Supply Chain Risk
 Risk is generally defined as an uncertainty that
endangers the accomplishment of business objectives or
a hazard, source of danger, or possibility of incurring
loss, misfortune or injury
Business Continuity and Risk
Management
 Supply Chain Risk
Business Continuity and Risk
Management
 Risk Example
 A company who had outsourced their manufacturing
discovered that a supplier was selling the companies
parts and components to a family member, who then
reproduced the branded product and was selling it for
$600 less than the originals
Business Continuity and Risk
Management
 Risk Mitigation
 In addition to “man-made” risk, unpredictable
situations and “Black Swan” events such as tsunamis,
earthquakes, volcanoes and other natural disasters add
irreversible costs to the sourcing process
 It is imperative that responses or contingency plans be
integrated into any sourcing or outsourcing strategy
 This will allow you to mitigate the costs of these
consequences and recover more quickly than your
competitors
Conclusions
 Most companies need to improve how they make their
outsourcing and re-shoring decisions, not because
they made a mistake but because outsourcing and reshoring is a dynamic process where circumstances
change over time
Conclusions
 Re-shoring is not a fad. It is a real supply chain strategy
based on real economic forces. Companies are making
strategic shifts to their supply chain models to take
advantage of the benefits of manufacturing in the U.S.
Every week, buyers and procurement professionals
want to re-shore work, usually back from China, due to
quality-control issues, time-to-market, delivery issues,
language barriers or simply to be closer to their
customers
Conclusions
 Companies that have done their due diligence have
found that what you want is not necessarily suppliers
that offer the cheapest price, but rather those that can
reliably provide the overall capability and capacity to
deliver consistent value in an uninterrupted supply
chain environment
Questions