When a European or North American manufacturer thinks about offshoring a factory or function today, it often looks first to China and India. Both countries offer an attractive combination of low costs, well-developed capabilities, business-friendly regulatory environments and large domestic markets — all reinforced by their governments’ robust public relations efforts. China and India offer such desirable characteristics, in fact, that they’re rapidly becoming the default choices for low-cost offshore operations.
But for those considering offshoring, there are dangers in taking too narrow a geographical view. Every country presents a different mix of strengths and weaknesses. One country may, for instance, have very low labor costs but a high degree of political instability and a small domestic market. Another might offer a wealth of engineering talent but quickly rising labor rates. A third may have robust local markets but intrusive regulatory regimes and a weak transport infrastructure. Moreover, the cost-benefit profiles of individual countries, particularly in the developing world, can shift rapidly and unpredictably. Currency fluctuations may unexpectedly swell the costs of sourcing from one country, for instance, or a natural disaster may wreak havoc on a critical source of supplies. If a company restricts its offshore arrangements to a small number of countries, it may unwittingly be assuming far more risk than it should.
Whenever an investment program involves choices with widely divergent cost and... To read the complete article, login or sign-up using the form below.
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