September 05, 2008

Is it time to rethink offshoring?

For some industries, yes.

Recent McKinsey research supports the observation in my August 3 post: Global Supply Chains – Longer Isn’t Always Better.

“Soaring oil prices, a falling dollar, and rising wages are undermining some of the reasons manufacturers moved offshore,” says McKinsey.

“For managers of global supply chains, the question now is whether or not to consider scaling back offshore production by returning operations to, or closer to, the United States.”

The McKinsey analysis shows that for a number of high-tech products, costs have changed enough, in many instances, to significantly undermine the benefits of offshoring to Asia. They note:

“The wage differential between Mexico and China has also narrowed significantly. In 2003, Mexican workers made over twice what their Chinese counterparts did; today that gap has narrowed to 1.15 times.”


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