February 2, 2012: After many years of outsourcing of business processes from the United States, we can see a reversing trend. Some of the jobs that were previously outsourced to China have started to return. Many of the factories in the United States that were closed down as a result of outsourcing have now started to open up. This is expected to create more job opportunities to the US citizens. Certainly it seems the government policies to curb outsourcing are working.
Many of the consulting companies predict that this move will make significant contribution in terms of job creation. For instance Boston Consulting Group estimates that the return of manufacturing works from China to the United States will result in a significant impact on employment. This returning of works back to home country is referred to as reverse outsourcing or insourcing.
According to the projection made by the Boston Consulting group, the return of manufacturing jobs and the service jobs which are associated with manufacturing will create about three million job opportunities in the Unites States.
This gives hope to millions of unemployed Americans who believed that the jobs that were outsourced were lost forever.
One of the main reasons behind the return of the jobs to the US is the rise in wages and benefits for employees in China. The rise is to the tune of 15 to 20 per cent annually which will take the cost advantage off the Chinese soil. The cost reduction of 55 per cent which is as a result of outsourcing to china will drop to 39 per cent by 2015. Since labor cost forms only a small portion of the manufacturing cost, the cost reduction from offshoring to China will be marginal.
When we consider other elements associated with outsourcing such as cost of transportation, duties, and other risks are considered, the cost reduction due to offshoring to China will be much less.
With the increase in the income levels in China and other Asian countries, the mindset of MNC’s is also changing. They wish to utilize China to serve the Chinese market and other Asian markets. They will utilize the American facilities to serve the American market.
So when all the costs are taken into account some of the states in the United States prove to be economic in terms of cost reduction across the whole world.