Photo Credit: Globes by

Photo Credit: Globes by Tup Wanders

In a special report, Tamzin Booth (The Economist) explores why companies are rethinking their offshore strategies after decades of sending work across the world. Key points:

  • An important reason for sending work offshore is low wages. American and European manufacturing pay has stayed steady, whereas wages in India and China have increased 10-20%.
  • Reshoring – this process involves bringing some work home again as American firms realize they went too far in sending work abroad.
  • Many companies got it wrong when choosing the right location.
  • The disadvantages of distance includes the sharply rising shipping costs of heavy goods and the negative effect on innovation when R&D is done at home.
  • Companies are moving away from manufacturing everything in one low-cost place model and want to move production close to customers in big new markets.
  • Outsourcing information technology and the routine back-office tasks that used to be done in-house has proved to be disappointing.