Running head: DOES OFFSHORING STILL MAKE SENSE? 1
Does Offshoring Still Make Sense?
BUSI 613
Liberty University
Journal Article Review 1
DOES OFFSHORING STILL MAKE SENSE? 2
Ferreira, J., & Prokopets, L. (2009). Does offshoring still make sense? Supply Chain
Management Review, 13(1), 20–27.
Summary
In this article review I will summarize the content which has been discussed in the
article by the authors as it pertains to the Supply Chain Management Theory. Ferreira &
Prokopets (2009), discusses the important issues when it applies to offshoring and whether it is a
good choice for companies to fulfill their ability to sustain their customers. I will also discuss
additional offshoring options where improvements can be made to improve the findings
identified in this article by its author’s.
Statement of the author's purpose
Author’s purpose of this article is to identify the challenges and difficulties that
companies are faced with when using outsourcing as an option for production. This article also
outlines the pro and cons when choosing the option to return to a domestic source for
manufacturing. The most significant increase in changes for production will be the increase in
cost for continuous goods' production and services once a company makes the decision to no
longer outsource. Ferreira & Prokopets’ efforts to explain offshoring and its sustainability
offered a number of pros and cons.
Many managers have the option to choose to remain overseas or return to a domestic
production market. This decision is a vital decision to be made and should be reviewed from all
aspects to ensure that the supply and demand of the customer will be met as well as their
customer satisfaction if this change occurs. A decision of this magnitude will not take place
overnight nor will it be a simple feat for the company to complete. However, with a sustainable
DOES OFFSHORING STILL MAKE SENSE? 3
industry, companies will save money by moving their operations back to the United States.
Application of supply chain management theory relevant to article
The application of the supply chain management theory is relevant to this article based on
the factors described by Ferreira & Prokopets (2009). The factors that made offshoring a “sure-
fire” tactic has since been rescinded and have had a minimal gain in fiscal savings and customer
satisfaction. Economical and sustainable options have been made available for onshore and
nearshore choices to be employed. Once these options are employed this then provides the option
to relocate manufacturing firms from overseas location to domestic location within the U.S. this
will allow for the cost of saving money on operational cost as well as the capability for oversight
on equipment production while increasing customer satisfaction.
Background of the issue
The background of the issue arises for companies when making the decision to utilize
offshoring options that will affect the company’s ability to support its’ customers supply and
demand. This decision is a vital decision that could adversely affect the company ability to
support their customers. Within recent years companies have been compelled to manufacture the
same product for the same quantity of people regardless of the standing of the American
economy. Although the ability of offshoring has been inevitable, and a high priority for
manufacturing companies over the last decade (Ferreiara & Prokopets, 2009, p. 1). Originally
companies believed they could reduce operational cost, but with an increase in international cost
it made it harder for the companies to sustain the cost reduction.
DOES OFFSHORING STILL MAKE SENSE? 4
Managerial implications
Some managerial implication identified have been complications with quality over
quantity when mass production of a product is involved the quality of that product decreases.
Another managerial implication identified is longer lead times for the product being mass
produced since overseas shipping time is also calculated into the time it takes the consumer to
receive it. The lack of on-site visibility of the manufacturer is another issues that companies face
when using offshoring manufacturing companies. Lastly, piracy can be an issue for companies
during the shipping process this may occur prior to or after the freight leaves the port.
Ferreiara & Prokopets (2009), also identified inability of companies to be able to
customize products and services for their consumers based on the limited shipping container
space limitations and month long order times limiting flexibility and responsiveness of supply
chains (p. 1). Additionally, they went on to discuss the inflexibility as well of the supply chain
customers that would no longer able to receive goods, services, and products tailored to their
specific needs. However, upon further reading there was no binding evidence for me to concur
with their findings on this perspective. Although these issues are all factual there was no actual
research in this article to corroborate these potential issues.
Ferreiara & Prokopets (2009), does however, present the facts about the operational cost
expended by companies with a constant increase in continuing operations offshore. The most
incurred cost for companies are the recurring demand cost of ocean freight have risen by 135%
(p. 2). As I read this article it seemed as though the authors had thoroughly conducted their
research to build a solid case on all the negative impacts associated with offshoring but the
greatest take away from this article is that offshoring prices tend to fluctuate on a daily basis. If
the fluctuation constantly increases this could be detrimental to the company.
DOES OFFSHORING STILL MAKE SENSE? 5
Between 2005-2008 research indicated the increase in offshoring operations over those
years. Recently, research has indicated that the price of offshoring operation from 2005-2008 has
fallen. It is imperative that companies conduct thorough research before making decisions of this
magnitude, which could adversely affect their company. The cost of shipping will always
fluctuate based on the global economy this fluctuation will determine if companies will be able
to fulfill their customers supply and demand as well as being able to shipping their goods and
product’s without taking a financial loss.
The option for companies to move their manufacturing back to or near an on shore
location in the foreseeable future can be done; however, this will be a challenge for the company.
Ferreiara & Prokopets notes that companies want to reach these goals through
functioning on a multi-region strategy (p. 3). One of the prevalent questions posed is what
would it cost for a company to bring their operations back to domestically? In a survey
conducted by the authors they reported that 30% of executives were considering the change and
in doing so 59% changed their business strategy. I acknowledge the informational findings in this
article however; I would have preferred to see more definite numbers in support of the changes
referenced in this article.
DOES OFFSHORING STILL MAKE SENSE? 6
References
Ferreira, J., & Prokopets, L. (2009). Does offshoring still make sense? Supply Chain
Management Review, 13(1), 20-n/a. Retrieved from
http://ezproxy.liberty.edu/login?url=https://search-proquest-
com.ezproxy.liberty.edu/docview/221135949?accountid=12085
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