Best of Spend Matters: Reshoring/Outsourcing

We send it out and bring it back home, over and over. Here's a round-up of some of our most-read stories on outsourcing, reshoring, and why nobody can make a decision about whether to do either.

It's July 4th -- Time for a Patriotic Round-Up of Re-Shoring Efforts -- Here at Spend Matters, we're about as American as it comes. We hail from different backgrounds, cultures, political persuasions, states and countries. We like to talk straight (and some of us know how to shoot straight, too). About all we have in common as a collective group is a passion for procurement, supply chain and new media. And of course, the love of charred meat (well some of us), apple pie, cold beer and just about all the accouterments of a good July 4th barbecue.

The Re-shoring of Spend -- Even Wired is Picking Up On It (Part 1) -- I usually read Wired as a form of tech magazine p*rn to stay remotely in touch with innovation -- easy on the eyes and almost always superficially enjoyable, if not more. Yet there's an article in a recent edition that suggests just how far the topic of re-shoring has come. It's not only hit the mainstream business press (e.g., FT, Forbes, WSJ , etc.-- it's now hit the more casual world of periodicals as well. The piece in question tracks the global sourcing challenges of a company, Sleek Audio, a "a purveyor of high-end earphones," including their sourcing flight from China. Before changing their production and sourcing strategy, the owner and his son were used to making "the long trip every few months to troubleshoot quality flaws" despite the fact "their Chinese partners assured them everything was under control." The situations this family-owned business faced in China are remarkable not because they're outliers, but because anyone involved in Chinese sourcing without two feet always on the ground will immediately relate to similar circumstances they've faced.

The Re-shoring of Spend -- Even Wired is Picking Up On It (Part 2) -- In the first post in this series, I called attention to a surprising piece in Wired (surprising in that it talks about just how mainstream manufacturing re-shoring has become) about the story of one organization that had successfully moved spend from China to a US supplier and increased its profitability in the process. The remaining part of the article succinctly captures a number of themes that we echo on these pages everyday. Consider, for example, how just as China labor costs have risen -- by as much as 50% on a total cost basis in some regions in recent years -- so too have US manufacturing prices declined thanks to productivity improvements and a continued drive to automation. Yet the real drivers of re-shoring and the reduction of China as a critical link in the production supply chain might be different.

Outsourcing Dissatisfaction: Lousy Service or Lack of Management? -- Outsourcing has evolved tremendously over the last 15 years, from the breadth of functions to the maturity of SLAs. So, what do today's risks look like? According to the 2011 IDG Enterprise Outsourcing and Service Providers Survey, the biggest risk is quality of service. CIO.com recently reported on the findings of this survey: "While 44 percent of the 1,176 IT leaders who responded to the online survey said their service-level agreements (SLAs) were tighter than they were three years ago, they cited poor-quality service as the top risk of IT outsourcing."

What Does "Innovation" Mean in Terms of Outsourcing? -- When the invitation to an Innovation Day run by the National Outsourcing Association appeared in my inbox a couple of months ago, I didn't think twice about registering. As a word, innovation is alluring, it promises to reveal secrets and give you a peek into the future. As a subject it regularly crops up at our events and in conversations with practitioners so I was interested to hear what NOA members, both end users and suppliers, were doing.

- Sheena Moore

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