One of the most critical aspects of business that involves manufacturing products is the location to base the manufacture. The production location aspect is vital to all business layers, including consumers, employees, shareholders, and society overall. The decision to locate the manufacturing process overseas closer to places with relatively low costs of human labor could significantly improve the firm’s financial state through reduced cost of production. However, reduced production costs would affect the quality of products, and additional expenses for shipping the products back to the US could potentially reduce the revenue and eliminate additional profits. In the last years, the tendency to relocate manufacturing overseas reduced due to ethical reasons. Locating the production in the US helps maintain and monitor the quality of products for the consumers, creates workplaces, and thus benefits the community and society.
As an alternative to relocation, according to Aziz et al., when profits begin to decline in big companies, the business may adopt the outsourcing option to cut expenses and enhance production efficiency (53). Thus, the outsourcing method is suitable if the business needs to reduce variable costs to be profitable.
The negative consequences of outsourcing for the business stakeholders are relatively smaller compared to production relocation. However, as a company is unable to control the production, several issues may occur from the manufacturer’s side, such as failing to fulfill the legal requirements of the offshore country. Thus, in outsourcing, each of the stakeholders is affected in a different way. The company’s financial assets, shareholders, and consumers may benefit from outsourcing the production if the manufacturer manages to keep the quality of the products on the same level. On the other hand, reducing the labor expenses and dismissals will negatively affect the company’s employees and the community.
In conclusion, outsourcing is a preferable option to relocating the production as it requires fewer financial expenses. However, choosing a reliable company for outsourcing partnership could be difficult and requires thorough examination for proper working conditions. Although outsourcing presents a good solution for businesses in financial distress, locating the production in US is more beneficial to all stakeholders as it helps to maintain the quality of products and creates workplaces.
Work Cited
Aziz, Abdul, et al. “Impact of Third-Party Outsourcing on Company’s Performance.” PalArch’s Journal of Archaeology of Egypt / Egyptology, vol. 18, no. 5, 2021, pp. 47-63.