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| Thought Paper |
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Offshoring Manufacturing to Low-Cost Countries |
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| Abstract |
The promise of high cost savings has compelled many global manufacturers to eye low-cost manufacturing destinations for setting up or expanding their manufacturing operations. Besides significant savings, Low-Cost Countries (LCCs) such as India and China are also attractive in terms of market potential, primarily due to the fast economic growth witnessed in these regions, and a huge population. However, as most manufacturers have discovered, outsourcing the manufacturing to LCCs is far more complex than just global sourcing. This is especially more relevant to small and medium enterprises.
Compared to large multinationals that have a global manufacturing presence and fine-tuned processes to move to low-cost countries, most small and medium businesses (SMBs) do not have the capability or the understanding to move their manufacturing operations to low cost countries. Migrations of large manufacturers are also aided by strong project, program management practices, and supported by the best IT-enabled business solutions.
Hence, for SMBs that want to establish their operations in LCCs, there is a certain degree of risk and uncertainty. This paper suggests a roadmap for moving manufacturing facilities to LCCs. The paper assumes that a business case for the transfer (including the decision on technology transfer to a partner or complete migration) is already in place.
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