Knee jerk offshoring.

There are usually numerous factors weighed prior to moving some company operations offshore. Being closer to your customers is probably the main reason, followed by economic and environmental considerations. There is a difference between setting up offshore to supply a certain region or customer and setting up offshore to supply the domestic market. Much is said about chasing the low wage worker, but much of the movement by rubber product manufacturers and their suppliers is fueled by the movement of their customers. And the customers are moving. The McKinsey Global Institute estimates that the volume of offshore outsourcing will increase by 30-40% a year for the next five years.

That's a large number, and consultant Tom Devane says it's the result of what he calls knee jerk offshoring. Devane has written a book advocating the combination of the improvement disciplines lean enterprise, six sigma and high-performance organization. "Before you move it, improve it," he says.

Devane claims that many that set up offshore facilities discover that for an operation to work smoothly overseas, the business process must be in optimum shape so it can be executed by the locals. The irony in this, according to Devane, is the company that pours its energy into significantly improving before moving will find that its efforts in making the operation cost effective and high quality, will make it unnecessary to move offshore.

You should make your customers aware that going offshore is not necessarily the answer to their competition problem. Nor is a reduction in your profits, which is usually their other option.

An example of how the customers are usually the driving force can be seen in the domino effect brought on by the decision of DaimlerChrysler to increase Jeep production in Toledo, OH. That announcement spurred three auto parts suppliers to plan to operate a plant at the site and work with the auto company to produce Jeeps. The new $900 million facility will employ about 800 mostly laid off Jeep workers. The supplier investment is expected to save the automaker $300 million.

DaimlerChrysler said what they are doing is insourcing, a term that hopefully becomes as prevalent as its opposite. Then maybe we won't have to worry about knee jerk off-shoring.