Question

The Midwest is known for its large manufacturing focus and with continuing global trade we continue to find ourselves shedding jobs as manufacturing jobs get outsourced abroad. Is this grounds to prevent trade and limit outsourcing? Provide a clear explanation of your answer

Answer 1

Every Coin has two sides . Similarly there are Advantages and Disadvantages of Outsourcing.

Advantages of Outsourcing:

• Business processes can get expert knowledge by outsourcing it to highly expert foreign staff thus resulting in more profits.
• Outsourcing result in lower labor cost as employees at low wages are available in the outsources country thus resulting in less cost of production and also benefit of economies of scale.
• It saves the time of management as routine outsourced activities does not require much attention and management can concentrate on more important activities.
• Increases speed and the quality of delivery of outsourced activities as the time consuming activities can be passed to the outsourced agencies who are expert in doing the assigned activities..
• It results in optimum utilization  of resources, reduction in cash flows and low cost of production.
• All this result in more return on investments and higher profits.

Disadvantages:

• Loss of jobs in the home country as the same jobs can be performed by the people of other country at low wages. Example Many jobs in US have been outsourced to India as the labor cost is low over there resulting in job loss in US.
• Loss of control over the business processes as these will be handled by workers in the country where outsourcing is done
• There may be serious problem related to quality of product and turn around time.
• Language and Cultural issues can pose a great challenge as these are different between the two countries.
• There is security risk. Employees where the business is outsourced  may not handle data properly and customer data may be leaked.
• The results may be far below than the expectations due to above mentioned problems.
• There can be sluggish response times coupled with slow issue resolutions.

Outsourcing decision should be taken prudently by weighing all the pros and cons. A company should not choose a location ton outsource only on the basis of low labor cost. Employing technically qualified people by at a little higher wage is much prudent then employing people sitting at distant miles having different language, culture and time zones. Yes, it would be great if outsourcing is limited as it will provide better job opportunities to the in house people. Outsourcing should be done if necessarily required and if it results in serious cost cuttings..