Why Do Companies Outsource Manufacturing?
Outsourcing is controversial because it is sends jobs and money from the home country to the outsource country. There are specific business reasons why companies choose to outsource despite the controversy. Cost Because the cost of labor, electricity and real estate in some countries is far less than in their home countries, companies can save money by locating their manufacturing facilities in those low-cost countries. Components Some companies specialize in manufacturing products for other companies, particularly components. For example, Sony manufactures televisions with thousands of parts. They might outsource the manufacturing of some of those parts, like LED diodes, to a smaller company that only makes diodes. Proximity It may be cheaper to ship products that the company sells in the overseas market from a country that’s nearby. For instance, it may be cheaper to manufacturer products in Thailand in order to sell them in Japan than to manufacturer in the U.S. and ship across the
