Outsourcing and Offshoring are thought to be the same thing. They are often used interchangeably at times due to the assumption of their likeness. However, there is a big difference between the two. Outsourcing is when pieces of a final product are made elsewhere from the main manufacturer. This can be any other location such as: another local company, county, state, or foreign country. Offshoring occurs when parts or all of production are moved to another country.
Manufacturers may outsource some of their materials needed to build their final product, from another company. In the electronics business many companies products put together are often used to create a final product of the manufacturer’s design. In electronic designs there are needs for wires, hardware, and even housing for a finished product. Each individual piece will be outsourced to other companies for creation.
Smaller companies will often outsource components for their finished products to local companies. This exchange of work will help boost the local economy and it will also build a good rapport with the local supplier of components. A good rapport with local suppliers is an asset in times of rush orders or when a change in product has been made. Local connections create shorter lead times on products. In a time crunch a manufacturer can physically go to the local supplier and implement the component quickly into their production.
American manufacturers offshore components to foreign companies to lower cost or because their manufacturing needs are not being met by an American company. Manufacturers can offshore components the same way they can outsource them. Wiring, hardware, housing, and other components can come from foreign countries such as China or Japan. Manufacturers will use products from these other countries because of cost efficiency. Components from Asian countries can cost a manufacture less but they also come with risks.
Delivery from a foreign country often takes longer than if a component is outsourced locally. Depending on when the manufacture needs the parts from the supplier a longer wait for delivery can affect the rest of production. Also, with farther to travel there is a higher chance of the product getting lost in transit. When a Manufacturer is depending on a components arrival only to discover that it was lost in transit, the wait time has then doubled the already long wait time.
Moreover because of lower cost the quality of supplied goods can be decreased. Damage of offshored goods is more likely than that of goods from local businesses. Increased handling of a product (as in shipping to and from multiple facilities) can increase the likelihood of damage. Production is forced to a halt until the damaged piece or pieces are fixed fixed or replaced.