The Insourcing and Backshoring Dilemma: Global Economies Fight for their Share

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Authors: Helen Lam & Anshuman Khare, Athabasca University, Canada
Email: Helen.Lam@fb.athabascau.ca
Published: March 2017
https://doi.org/10.22492/ijbm.2.1.04

Citation: Lam, H., & Khare, A. (2017). The Insourcing and Backshoring Dilemma: Global Economies Fight for their Share. IAFOR Journal of Business & Management, 2(1). https://doi.org/10.22492/ijbm.2.1.04


Abstract

Since the financial crisis, there has been an increased awareness about the globally interconnected world of business, its complexity and sustainability. There is emerging evidence that one popular aspect of global supply chains, outsourcing, is taking a reverse turn and insourcing and backshoring are on the rise. Reasons for such a change include considerations for cost (labour cost, transportation cost, tax differentials, exchange rates, etc.), quality control (provider reliability, availability of internal expertise), customer satisfaction, security (protection of intellectual property and information privacy), speed to market, effect on innovation (e.g., proximity of operations with R&D), and overall risks and uncertainties (e.g. political and environmental stability). Basically, outsourcing cost advantages have been gradually eroding, especially when productivity-adjusted labour cost is considered. However, insourcing does come with a set of challenges, particularly in relation to human capital, infrastructure and the level of resource commitment. To ensure insourcing effectiveness and sustainability, all stakeholders have roles to play. Strategies and processes must all be aligned. Otherwise, the balance may once again shift toward outsourcing. This paper, then, explores how emerging economies (who have felt the negative effect of insourcing) can “fight back” to reverse the trend with adjustments to their economies, markets and organizational strategies.

Keywords

insourcing, backshoring, reshoring, offshoring, outsourcing