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I've got some friends in the buying and transportation departs of several major firms.
I've always asked them why do companies off-shore their manufacturing so much. The feedback is that the profit margins are quite high.
Personally, I haven't seen the numbers; but I don't get this given that:
a) Offshoring means that you have longer manufacture and transportation lead times
b) Offshoring means that you can't return the product to the vendor if it doesn't sell
c) Offshoring means that you have to have increased warehouse space to store the product before the sale or if it doesn't sell
d) Offshoring means that there's a higher percent of damaged goods that cross the water (container damange)
e) Offshoring means that your consumer demand forecast has to be SPOT on other wise you'd have excess inventory that you have to store and cannot return
Now with the increase in gas prices, I'm thinking that the 'good news' could be that the manufacturing could come back because the increased cost for marine transportation could eat away on the profit margins.
Anyone have a supply chain or domestic manufacturing background?
I've always asked them why do companies off-shore their manufacturing so much. The feedback is that the profit margins are quite high.
Personally, I haven't seen the numbers; but I don't get this given that:
a) Offshoring means that you have longer manufacture and transportation lead times
b) Offshoring means that you can't return the product to the vendor if it doesn't sell
c) Offshoring means that you have to have increased warehouse space to store the product before the sale or if it doesn't sell
d) Offshoring means that there's a higher percent of damaged goods that cross the water (container damange)
e) Offshoring means that your consumer demand forecast has to be SPOT on other wise you'd have excess inventory that you have to store and cannot return
Now with the increase in gas prices, I'm thinking that the 'good news' could be that the manufacturing could come back because the increased cost for marine transportation could eat away on the profit margins.
Anyone have a supply chain or domestic manufacturing background?
