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Off-shoring and on-shoring: not just a question of labour costs

Iain Henderson

Faculty Blog

English: An Indian call center

English: An Indian call center (Photo credit: Wikipedia)

For the past couple of decades cheap labour in developing countries has been the driving force behind the phenomenon of “off-shoring” whereby manufacturers and service providers in developed economies transfer operations to developing ones. US to China is the paradigm case. Off-shoring has often been hugely controversial in the countries undertaking it because of the very large number of jobs lost as a result.

Now there are signs that the tide is turning and some very large US firms including Apple, Google, Caterpillar, Ford and Intel have recently stared to repatriate significant amounts of operating capacity. 

Interestingly  however, although the difference in labour costs between developed and developing economies has narrowed in recent years, this is not the only factor. Others include the need for ever-faster innovation, which can be hindered by long global supply chains; the need for control over the value chain; and, not least, increased public sensitivity of customers to the need for decent and safe working conditions for employees.  Famous brands have been harmed by revelations of dangerous workplaces and the use of child labour.  

An interesting article on the subject was published by the US online journal ‘The Atlantic.’ Click here to see it. If you have had any interesting onshoring experiences, do post here and let us know.