Offshoring

Offshoring

1. Reasons for offshoring

   • 23% of firms globally are keen to transfer production to China/India for lower cost, highly skilled workforce
   • High quality, specialist, flexible labour is available

2. Trend

   • Firms are reversing the trend of offshoring.
   • The advantages that can be gained from offshoring have already been enjoyed.

3. India/China

   • 2/3 of the world's outsourced IT work is in India
   • Wages in India/China have risen between 10% and 20% in the last decade
   • Workers at China's Foxconn making Apple products got a 47% after series of suicides at the plant in 2012

4. Reasons for reshoring

   • HIdden Wage Costs
     • Worker Unrest, China's Foxconn
     • Working in different time zones. E.g overtime costs
     • Ability of offshore IT experts and mangers to command high salaries
   • Transport Concerns
     • Time: 6 weeks from Asia to UK
     • Increased security risk, in times of war/unrest. E.g Russia in Crimea
     • Cost of sea transport
     • Natural disasters. Fukushima
   • Change in Labour Cost Ratio: Automation makes labour only 30-40% cheaper
   • Tariff costs: Non EU products will face common external tariff
   • Call Centres
     • Lack appeal, cause anxiety, cultural differences

5. Other reasons for reshoring

   • UK is specialising in innovation and design
   • Hidden costs such as insurance
   • Weak currency makes buying labour abroad expensive
   • Proximity to market, e.g Land Rovers
   • Corporation tax
   • Adequate infrastructure, i.e. links to America