CHAPTER 17, ASSIGNMENT 10

ASSIGNMENT 9, CHAPTER 9

Assignment 9.4

The past 10 years have seen a growing trend for manufacturing operations to be moved off shore from the United States to Asian countries. Prepare a list pros and cons concerning the off shoring issues.

Offshoring is seen in the context of possibly production offshoring or services offshoring. After its accession on the World Trade Organization (WTO) within 2001, the People's Republic of China emerged as a prominent destination for production offshoring. Another focus area has been the software industry as part of global software development and building global information systems. After technical progress in telecommunications improved the number of choices of trade in services, India became a country leading in this particular domain, though many parts with the world are now emerging while offshore destinations.

Offshoring could be the relocation of a business process derived from one of country to another typically an operational process, such as production, or supporting processes, such while accounting. Typically this refers to a company business, although state governments also can employ offshoring.

Companies are always on the lookout for new ways to reduce costs and maximize profits. One method that has gained considerable popularity in recent years is offshoring, which refers to the sourcing of products, parts and labor from foreign countries. Although it is an effective way of reducing costs, it has also generated a considerable amount of controversy in all levels of American society.

            The economic logic should be to reduce costs, sometimes called job arbitrage, to improve corporate productivity. Jobs are added in the destination country providing materials or services (generally a lower-cost job country), but are subtracted from the higher-cost labor country. The increased safety net costs of the unemployed might be absorbed by the government (taxpayers) from the high-cost country or by the company doing the offshoring. Europe experienced less offshoring than North America due to policies that employed more costs to corporations along with cultural barriers.

Swiftness and Expertise with Offshoring

• Another advantage to offshoring products is that labor can be outsourced to professionals who are experts in their field at a lower cost. In fact, many of these professionals are better at their chosen professions than those who can be found within the offshoring organization. Important tasks can be completed quickly and more efficiently than they would be with on-site employees. This, in turn, also allows the offshoring organization to focus on other matters and possibly expand its business.

Offshoring as a Cost-Saving Measure

• The biggest reason why so many American companies are flocking to offshore their products and services is that it is a cost-saving measure. Since lower overhead costs lead to larger profits, it's easy to see why offshoring is so popular. Other countries often have lower labor rates and require fewer benefits, so companies do not have to spend as much money on labor. Other cost savings through offshoring are realized through lower taxes, different environmental and safety standards, more lax work rules and labor laws, and lower equipment costs.

Appraisal and Financing Limitations

• Offshoring a product can save a company money and provide some measure of privacy usually not available in the United States, but the very fact that a major part of a company's process is being performed in other countries makes it difficult for owners, financial partners and investors to determine the full value of the company. The product is quite simply out of reach, a fact that can cause lenders to become reluctant to approve financial assistance for the company.

Environmental and Political Disruptions

• Another issue that arises when offshoring a product is that companies are at the mercy of political and environmental disruptions. Large chains that rely on products being shipped to American stores from around the world are often out of luck if a major storm system hits the offshored facility or its shipping lines. Political issues and occasionally-limiting labor laws can also cause problems. The very practice of offshoring products takes these problems out of a company's hands.

ADVANTAGES

1. No additional employment cost.

 There can be many extra costs involved in traditional onshore staffing but with outsourced offshore staff there is no extra costs. For example in Australia an employer is required to pay 9% extra for superannuation but this extra cost is not required when you lease staff through us. In other countries there are different extra employment costs and taxes that can be reduced or eliminated by using our offshore staff leasing service. And its not just the direct costs but it is also the administrative time and effort that is required to work out all these extra charges, but with our offshoring service it is just one simple and easy regular monthly payment and even that can be automated to save you administration time.

2. Save money with lower staff costs

 This is the big benefit and major attraction to offshoring. An example of the saving achieved is that typical graphic designer in USA may cost on average $6,250 per month where we can supply senior experienced graphic designers for under $2000 per month, giving you a saving of over $4000 per month to start with. We can supply junior graphic designers at just $995 per month so the savings can be considerable.

3. Save on employee supervision and management

 While you will need to manage your offshore staff so they know what to do, we provide onsite supervision and motivation through our professional managers who ensure that your staff arrives on time, works diligently and has all the tools they need to perform their duties.

4. Increased staff morale and productivity

 You can increase the morale and productivity of your existing onsite staff by letting our offshore staff do all those boring and tedious tasks that your staff do not like doing. For example: ◦ If your sales staff do not like cold calls (and who does?) then hire our call center operator to do it for them.

If your web site manager cant find the time to get the back links that he knows is important, then hire a link builder for just $995 per month and know that it is being done efficiently and consistently to achieve great SEO results and the web manager can spend time on the more important website management tasks.

If your programmers do not like doing testing then outsource it so they can get back to the development work they much prefer to be doing.

If your senior staff know that maintaining their social networks (Facebook, LinkedIn, Twitter, Plaxo, etc) is essential but do not have the time to keep them all up to date with regular postings then hire one of our offshore staff to do it for them.

5. Save on office space and equipment

 You can increase your staff without increasing your office space when you lease staff through us. We provide your new leased employee with a complete workstation consisting of a desk, chair, phone, computer and standard business software. That is just the direct costs you can save but there is also many indirect proportional costs that you could save with things such as employee lunch rooms and games facilities or maybe its just a saving in electricity or even coffee expenses. Each employer will have different costs but there will always be some savings in overhead expenses by having staff offsite.

DISADVANTAGES

1) Loss of customer focus, from the offshore company – Since the majority of the offshoring companies are not facing the end customer on a day to day basis, a certain lack of customer focus can usually be experienced in the employee base

2) Time differences – Many offshoring companies operate within a 5 – 12 hour difference from the end customer. This occasionally tends to lead to difficulties in communication and project management

3) Cultural and language barriers between the companies – The vast gap in culture and language can lead to business and personal misunderstandings and clashes under certain circumstances. Which may in turn lead to costly losses for both companies.

4) Heavy reliance on an onsite resource – Some offshore companies attempt to address these issues by having resources onsite. This however comes with its own set of problems as the company then relies heavily on these individuals for most, if not all, customer communication.

ASSIGNMENT 9, CHAPTER 9

ASSIGNMENT 11, CHAPTER 11