• 5 Facts About Overseas Outsourcing - Center for …
  • 5 Facts About Overseas Outsourcing
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Apr 30, 2013 · Bangladesh Factory Collapse Will Force Companies to Rethink Outsourced Manufacturing. The news of yet another disaster in …

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Outsourcing feasibility analysis including internal vs. external costs, evaluation of potential supplier processes, negotiation of contract terms for a LED lighting products company with global sites. Manufacturing requirements included PCBA power supplies and light engines, CNC machining and powder paint coating of complex aluminum parts; also encapsulation of electronics for moisture proofing, final assembly and leak test for ATEX and IECEx certifications for hazardous and explosion-proof environments. Large number of SKU’s across multiple product lines plus some custom products.

Guided transition planning and first phases of production transfer including negotiation of NRE charges. CMC identified and evaluated design/build suppliers for new automated powder paint system, led specification setting and creation of turnkey installation contract including deliverables and progress payments.

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they would respond with a resounding "no". Therefore, in today’s global environment, the most strategically viable manufacturing strategy is the outsourcing of their products. The efficiencies that are gained, in the form of shifting of risk, reduced capital requirements, lower wages, and ability to focus on their core competencies, strongly outweigh all other manufacturing options.


Bangladesh Factory Accident: Manufacturers May …

Nike currently enjoys a 47% market share of the domestic footwear industry, with sales of $3.77 billion. Nike has been manufacturing throughout the Asian region for over twenty-five years, and there are over 500,000 people today directly engaged in the production of their products. They utilize an outsourcing strategy, using only subcontractors throughout the globe. Their majority of their output today is produced in factories in China, Indonesia, and Vietnam, but they also have factories in Italy, the Philippines, Taiwan, and South Korea. These factories are 100% owned by subcontractors, with the majority of their output consisting solely of Nike products. However, Nike does employ teams of four expatriates per each of the big three countries (China, Indonesia, Vietnam), that focus on both quality of product and quality of working conditions, visiting the factories weekly. They also developed their code of conduct in 1992 and have implemented it across the globe, as its goal is to set the standard for subcontractors to follow if they wish to do business with Nike. However, due to a manufacturing network of this magnitude, they have faced numerous violations involving factory conditions and human rights issues, which have been widely publicized. They have responded to these issues through the Andrew Young report, the Dartmouth Study, and Ernst & Young’s continual monitoring, but are still approximately two years away from completely addressing these problems throughout the globe.

Footwear companies have two basic options in the manufacturing of their products, they can both own and operate the factories that produce their products, or subcontract their products out to secondary manufacturers. These facilities can be located either domestically or internationally, and both present a myriad of positives and negatives. Firms that produce domestically benefit from ease of monitoring, skilled workforce, government stability, job creation, and well understood labor rules, while suffering from the relatively high wages required in the U.S. as compared to developing countries. By manufacturing products overseas, in particular in third world economies, tremendous efficiencies are gained in the form of reduced wages, but are countered by the increased difficulty of monitoring the quality of their products and the actual working conditions in the factories. Companies that are vertically integrated, who own and operate the factories where their products are manufactured, are faced with large capital expenditure requirements and the management of the factories themselves, resulting in lower profit margins.

Offshoring vs. Outsourcing - Mount Holyoke College

Reebok, as the second leading manufacturer of footwear, has domestic revenues of $1.28 billion and a market share of 16%. Similar to Nike, they also utilize a 100% outsourcing strategy and manufacture their products throughout Asia. They have created and implemented their own code of conduct for manufactures to follow, but have less infrastructure than Nike across the globe to enforce it. They are facing scrutiny in regards to wage, overtime, and air quality issues, and like Nike, are working to address these issues. However, their strength, the creation and distribution of a global brand, is allowed to foster under this manufacturing strategy, as they focus on their core competencies, and outsource their production.

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Adidas is currently enjoying the fastest growth of any brand domestically, with a market share of 6% and revenues of $500 million. They have been shielded from bad publicity by the two Goliath’s of the industry, Nike and Reebok, and are reaping the rewards substantially. They have adjusted their manufacturing strategy, from a vertical operation in Germany in the 60’s and 70’s, to an outsourcing focus today throughout Asia. Unlike the big two, they do not have a code of conduct, and their factories are considered to be the worst in the industry. It is just a matter of time before they are exposed, with an underground swelling of negativity already occurring today. In order to avoid the negative effects and lost revenues that Nike and Reebok have received, they need to immediately begin to take a proactive stance in regards to the working conditions of their factories.

The Pros and Cons of Manufacturing in China - Entrepreneur

With a market share of 3% and revenues of $280 million, Converse manufactures their products both domestically and internationally. It is important to note that the only product they continue to manufacture in the U.S. today, is the Chuck Taylor All Star, with plants in Lumberton, NC and Mission, TX. This is a product where the "Made in the USA" label is crucial to its success, and internalization is a source of competitive advantage. These two factors serving as the sole reason why the production remains within the U.S. All other shoe models are outsourced in Asia, with the explanation of reduced wages driving this strategy. Converse, like Adidas, must also generate a higher degree of internal monitoring of their subcontractors, or they will soon face increased scrutiny