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Manufacturers interested in outsourcing

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29 Aug 2013

A skills gap may be developing in the manufacturing industry in the United States. But the question is: Should organizations be worried? According to a new study from the The Boston Consulting Group, the answer is no. In fact, 90 percent of the biggest manufacturing areas have not revealed any evidence of significant manufacturing skills shortages. Not only are the fears of a manufacturing skills crisis considered to be disproportionate, but manufacturers are also feeling more comfortable outsourcing jobs to Mexico and other emerging markets.

Manufacturers are cutting back out training initiatives, recruiting
After taking the insights of 100 companies with U.S. manufacturing operations, BCG concluded it might not be that workers are becoming less skilled, but that businesses have taken a lackluster approach to professional development. Organizations have reduced the amount of in-house training over the years, while they are not taking the time to seek out talent from high schools and community colleges.

"Quite often, the skilled workers are available - just not at a price employers are willing to pay," said Harold  Sirkin, a BCG senior partner and co-author of the research. "Or companies do not bother to recruit at community colleges and vocational schools."

Manufacturers may be looking to cut their training and recruiting budgets can save money by manufacturing in Mexico and taking advantage of shelter companies that carry out several processes and allow manufacturers to focus on production. Outsourcing business functions to Mexico gives organizations the opportunity to reduce spending on freight and shipping, turnover reduction programs and services and direct and indirect labor recruitment.

Technology companies are increasingly interested in outsourcing
With innovations in technology seemingly popping up every day, manufacturers in the U.S. need help. A March survey conducted by accounting and consulting organization BDO USA, found 43 percent of 100 U.S. CFOs expect to grow their staff throughout the country this year, while 63 percent are planning to outsource aspects of their manufacturing processes this year. 

"Despite an unemployment rate still hovering near 7.7 percent, the technology industry is rapidly growing, thanks to new technologies and trends like big data, mobile applications and cloud collaboration," said Aftab Jamil, partner and director of the technology and life sciences practice at BDO USA.

Lee Duran, partner in BDO Seidman's technology practice, told InformationWeek in a 2008 interview that CFOs have begun seeking out outsourcing opportunities in Mexico because they want to be in the same time zone as their customers in the U.S. Understanding the benefits posed by teaming up with shelter firms in Mexico could allow CFOs to carry out operations more efficiently, as well as see lower manufacturing costs.

Manufacturers want to outsource different processes
Outsourcing operations gives U.S. manufacturers the opportunity to focus on production of their offerings. According to the BDO research, 56 percent of CFOs are expected to outsource research and development, 42 percent are going to send distribution tasks across borders, while 30 percent organizations plan to seek out help with IT services and programming. Technology manufacturers that are able to free up their staff with the assistance of offshore shelter companies can look for opportunities to achieve growth and become a leader in their industry.

"While the drive to remain competitive has led technology companies to maintain outsourcing contracts, many are working in tandem to grow their U.S. workforce to develop new and innovative products and solutions in the U.S. while outsourcing traditional 'back office' operations," Jamil said.

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