What are the True Costs of Offshoring?

On ThomasNet News, the article, “What Are the True Costs of Offshoring?” touches upon the trend of manufacturing and what costs need to be factored in. Before, companies were basing their offshoring decisions off unit price alone; to return, they’re basing it off of total cost. Michelle Nash-Hoff, author of the book “Can American Manufacturing be Saved?” lists a few of the major factors that are considered when bringing work back to the U.S.: Inventory, cash flow, and travel.

Nash-Hoff elaborates that “businesses are being forced to buy larger lots to get the best China price.” Additionally, lower-volume businesses are being forced “to pay for parts before they’re shipped… Only the major companies are getting favorable terms.” Lastly she explains that if “the qualities of parts are sub-par and the manufacturing has to be reworked,” this will increase costs when “traveling to Asia becomes necessary or frequent.”

Harry Moser contributes his perspective that often times companies forget to factor in “costs associated with shipping, inventory time, quality issues, and exchange-rate risks.” Harry Moser’s Reshoring Initiative provides a Total Cost of Ownership Estimator (TCO) which estimates both direct and indirect costs of the entire manufacturing process.

For more hidden costs of offshoring, visit the article at thomasnet.com.