Ancillary #1 Outsourcing
Walking into any fast-fashion clothing store like ZARA or H&M, customers can easily recognize products that are “made in Indonesia,” “made in Vietnam,” or “made in India.” Actually, outsourcing the primary production to some developing countries around the world is relatively common in most businesses in the U.S., whether in traditional goods, such as food or clothes, or in the high-tech field, like Apple or Microsoft production. Outsourcing can be considered the outcome of globalization, that many parts of the world are interconnected. However, globalization brings debate on whether outsourcing is the model that would benefit local or national citizens.
Thanks to the interconnection and interdependence around the globe, there are many benefits of outsourcing businesses around the world. Companies can save their cost in production while reaching better quality by giving part of their business to Asian countries, where labor cost is cheaper and tax is relatively lower than the home countries. Besides, the work can be done with increased efficiency, as there exists a time zone difference between western and eastern countries. Assigning the tasks before sleeping, the manager may expect the outcome once he/she wakes up. In addition, for high-tech companies, outsourcing is an effective solution for the specialized labor shortage. If the employer only hires workers in the local talent pool, the choice may be limited, and compromise might be made. However, outsourcing would provide high-tech corporations with a larger pool of talents worldwide so that there will be a better fit for the open position.
However, there are also local and national problems regarding outsourcing. For example, it might impact the company cultures and attitudes of local employees. A positive work culture leads to higher productivity, but if employees are skeptical of why certain tasks are outsourced, they might be in doubt of whether they will be replaced in the future. It is harmful to the coherence of the corporation members. Speaking nationally, with more jobs being outsourced, citizens from the primary location may lose some job opportunities. According to a statistic published by Economic Policy Institute, in the manufacturing sector, it’s estimated that offshoring has led to the loss of nearly five million American jobs since 1997, whereas the employment remains the same globally. Moreover, because the cost of production is reduced, the final price of the goods can also be lowered in order to be more competitive in the market. Therefore, outsourcing may drive down the current prices for various goods.
