Companies Look to Repatriate Some Operations

by: Smith and Howard

April 3, 2014

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More US companies are looking to repatriate some operations. As labor costs rise overseas, more U.S. companies are carefully weighing their offshore strategies and expanding jobs domestically. The vast majority of CFOs (95 percent) do not anticipate offshoring their operations in the coming years.

“CFOs are trying to look a little more holistically at outsourcing,” said Aftab Jamil, partner and director of the BDO Technology and Life Sciences practice in an Interview with The Wall Street Journal. “They are saying do we really save enough money that it is worth that risk?” 

Of those who currently outsource or offshore services outside of the U.S., 59 percent indicate that manufacturing is the most heavily outsourced function, followed by R&D (54 percent) and IT services and programming (41 percent).  

In regard to geography, China and Southeast Asia are leading outsourcing destinations for manufacturing. Sixty-five percent of CFOs report that China is the primary location for their manufacturing needs as production skills have become more sophisticated, followed by Southeast Asia (48 percent) and Western Europe (19 percent). As for future targets for outsourcing, a majority of CFOs (57 percent) said they are most likely to consider Latin America in the coming years. 

Conversely, an increasing number of technology companies have begun to promote their efforts to bring manufacturing back to the U.S. For example, Apple is preparing to open a manufacturing facility in Arizona, which will create hundreds of new jobs, and has also recently retained U.S. manufacturer Flextronics to assemble its Macintosh computers in Texas.

This article originally appeared in BDO USA, LLP’s “Technology Outlook” newsletter (2014). Copyright © 2014 BDO USA, LLP. All rights reserved.

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