What is offshoring? How does it affect manufacturing and logistics?

When an activity is relocated to a contract manufacturer in another country, it is commonly called offshoring . The business case for outsourcing varies by situation, but the reasons often focus on cost and capacity issues. The outsourcing strategy commonly provides a more viable means to variable capacity at a lower cost than the flexibility strategy.Other reasons for production outsourcing include the following: ​
• The ability to focus on core competencies by getting rid of peripheral ones
• Lack of in-house resources
• Getting work done more efficiently or effectively
• Increased flexibility to meet changing business and commercial conditions
• Tighter control of budget through predictable costs
• Lower ongoing investment in internal infrastructure
• Access to innovation and thought leadership ​ While outsourcing has proven to be a valuable strategy whose popularity has grown dramatically, it is important to conduct a full analysis of the benefits and drawbacks of offshoring. Moving production offshore raises transportation costs, inventory carrying costs of goods in transit, customs costs, and some hidden expenses. As production spreads out among multiple facilities in different countries, it becomes more difficult to maintain visibility and synchronize activities. Finally, companies may lose control over quality, intellectual property rights, and customer relationships.