Offshoring is a pretty common strategy used in manufacturing and specialized services like software development.
Basically, companies do it to get ahead of the competition. They move parts of their business to another place to take advantage of what that area has to offer, like skilled workers or tax breaks.
But lately, the structures of traditional outsourcing destinations have been changing, and companies are finding some problems related to offshoring.
Right shoring has become a new option. It’s all about finding the right balance between cost and benefits. But what exactly is it, and how does it differ from traditional offshoring?
Let’s explore this concept, its benefits, factors to consider, and how it can unlock the best of outsourcing for your business.
What is right shoring?
Right shoring, or strategic outsourcing, is all about picking the perfect location to handle different parts of your business.
You’re looking at things like cost, quality, how close they are, and if they fit with your company culture.
A study from North Carolina State University explained why this type of outsourcing matters. It emphasized that the following factors can easily be navigated with strategic outsourcing:
- Changes in global economics
- Technological innovation
- Building in-house capabilities
- Policy-making by governments
Unlike traditional outsourcing, right shoring is not just about cutting costs by shipping everything to the cheapest place — it’s about finding that sweet spot between local, nearby, and far-off destinations to get the best results for your business.
Right shoring vs. Offshoring
While both right shoring and offshoring involve outsourcing business processes to external providers, they differ in their approach and objectives.
Offshoring typically involves transferring work to countries with lower labor costs, often located far away from the organization’s home country.
Right shoring, on the other hand, takes a more nuanced approach. It considers factors beyond cost, such as proximity, skill availability, cultural compatibility, and risk mitigation.
Benefits of right shoring
Right shoring brings a bunch of perks for businesses aiming to fine-tune their outsourcing game:
With right shoring, companies can tap into talent from around the world while keeping costs in check. By figuring out what each job needs, they can decide whether to keep it in-house, nearby, or far away.
Ex. Moving a customer service center offshore can cut labor expenses while keeping IT support close can ensure quick help when needed.
Strategic outsourcing lets businesses stay nimble in a fast-changing market. They can easily scale up or down as needed, making sure they have the right people in the right place at the right time.
Ex. A seasonal surge in demand for a product can be met by outsourcing manufacturing to a nearby location. This reduces lead times and transportation costs.
Top talent access
Right shoring allows organizations to access a wide pool of talent, both at home and abroad. By setting up shop where the experts are, they can stay ahead of the competition.
Ex. A software development company might decide to establish an R&D team in a location renowned for its expertise in a specific programming language.
By spreading their operations across different locations, companies can dodge risks like political turmoil, natural disasters, or economic ups and downs. It’s like having a safety net, ensuring smooth sailing even when things get choppy.
Ex. If one factory gets hit by a disaster, a company leveraging right shoring can keep operations running smoothly elsewhere without missing a beat.
Factors to consider when right shoring
When implementing a right shoring strategy, several factors need to be taken into account to ensure its success:
Nature of work
Not all functions or processes are equally suited for offshoring or nearshoring.
Critical or time-sensitive activities may require closer proximity for seamless collaboration, while more standardized tasks can be effectively offshored.
It is important to evaluate the cultural fit between the company and the chosen location. Differences in business practices, communication styles, and work ethics can impact productivity and teamwork.
Language and communication
Effective communication may be disrupted, and misunderstandings can arise because of language barriers. Assessing the language skills of potential locations is crucial to ensure smooth collaboration and customer service.
Infrastructure and technology
Consider the availability and reliability of infrastructure, including transportation networks, technology infrastructure, and Internet connectivity. Access to high-quality, reliable systems is essential for seamless operations.
Regulatory and legal environment
Compliance is a must. Check whether your service provider complies with local regulations, intellectual property laws, data privacy regulations, and other legal considerations in outsourcing destinations.
Develop contingency plans and risk mitigation strategies. Make sure they address potential geopolitical, economic, operational, and cybersecurity risks associated with outsourcing.
Unlock the best of outsourcing with right shoring
Right shoring is a powerful strategy that allows businesses to make informed decisions regarding the optimal location for their various functions and processes.
By embracing this approach, companies can harness the benefits of globalization while mitigating risks and enhancing their competitiveness.
So, next time you contemplate outsourcing, consider the power of right shoring!