Ceramic Industry

Is Outsourcing the Answer?

July 28, 2008

The question, of course, is “How can my company save money and remain competitive in this increasingly difficult economy?” It’s not a new question, for sure. For decades, U.S. manufacturers have moved services, logistics, engineering and production operations off-shore in order to reduce costs. Labor is much less expensive overseas, and manufacturers need not worry about as many pesky environmental regulations when operating far from the reach of the EPA.

Of late, however, rapidly escalating oil prices have pushed fuel costs through the roof for many manufacturers, resulting in supply chain questions and untenable transportation costs. Subsequently, many U.S. manufacturers are actually relocating production operations back to domestic locations.

Outsourcing is still a viable option for many manufacturers, however, despite fuel costs and the increasing complexity of the global marketplace. Sourcing advisor EquaTerra predicts that “demand for business process and IT outsourcing (BPO and ITO) is expected to exceed 2006 and 2007 levels. [Second quarter 2008] demand and supply increased for emerging knowledge process outsourcing functions such as engineering, research and development, financial modeling and analytics, and legal process work. There was also growth in areas like document services, facilities and real estate management, and logistics services.”

A recent report from the National Association of Manufacturers (NAM) offers advice on “Forging New Partnerships: How to Thrive in Today’s Global Value Chain.” According to John Engler, president and chief executive officer of NAM, “Small and medium manufacturers account for 40% of U.S. production value, and their successes and failures can have a substantial impact on America’s economy. Manufacturers must collaborate closely with new domestic and overseas partners to survive and thrive in the global supply chain. In today’s economy, small and medium manufacturers are more than just suppliers. They are helping to create the new technologies, products, services and business models that are vital for success, both here and abroad. By connecting with outside resources – customers, government, academia – small and medium manufacturers can swiftly expand their core competencies and gain economies of scale.”

A copy of the full NAM report is available at www.nam.org/supplychain. Additional information from Equa Terra is available at www.equaterra.com.