How can you decide if offshoring production in Lean Manufacturing is right for your business?

1 The nature of your product

Some products are more suitable for offshoring than others, depending on their complexity, customization, and demand variability. For example, if your product is highly standardized, low-cost, and has a stable demand, you may benefit from offshoring to a low-wage country that can mass-produce it efficiently. On the other hand, if your product is complex, customized, and has a fluctuating demand, you may be better off keeping it close to your customers and suppliers, where you can respond quickly and flexibly to their needs and feedback.

2 The impact on your value stream

Offshoring production can affect your value stream, the sequence of activities and processes that deliver value to your customers. Offshoring can create waste in the form of transportation, inventory, waiting, defects, and overproduction. For example, shipping your products across long distances can increase lead times, costs, and risks of damage or loss. Holding excess inventory can tie up your capital, space, and resources. Waiting for your offshore suppliers or customers can cause delays and inefficiencies. Defects in your offshore products can damage your reputation and customer satisfaction. Overproducing your products can create waste and obsolescence.

To avoid these wastes, you need to optimize your value stream by applying lean principles and tools, such as value stream mapping, pull systems, kanban, kaizen, and poka-yoke. You also need to establish clear communication, coordination, and collaboration with your offshore partners, and monitor their performance and quality regularly.

3 The trade-offs and risks involved

Offshoring production is not a one-size-fits-all solution. It involves trade-offs and risks that you need to weigh carefully against the potential benefits. For example, offshoring can lower your labor costs, but it can also increase your transportation, logistics, and compliance costs. Offshoring can expand your market reach, but it can also expose you to cultural, legal, and political differences and uncertainties. Offshoring can enhance your innovation and competitiveness, but it can also compromise your intellectual property and core competencies.

To manage these trade-offs and risks, you need to conduct a thorough analysis of your costs, benefits, and alternatives. You also need to develop a contingency plan for any disruptions or emergencies that may arise from your offshoring operations.

4 The alignment with your vision and values

Finally, offshoring production is not only a business decision, but also a strategic and ethical one. You need to consider how offshoring aligns with your vision and values as a lean manufacturer. For example, does offshoring support or undermine your mission to deliver value to your customers? Does offshoring enhance or erode your culture of continuous improvement and respect for people? Does offshoring reflect or contradict your social and environmental responsibility?

To answer these questions, you need to have a clear and shared vision and values that guide your offshoring strategy and practices. You also need to engage your stakeholders, including your employees, customers, suppliers, and communities, in your offshoring decisions and actions.

Offshoring production in lean manufacturing is a complex and nuanced issue that requires careful consideration and evaluation. By taking into account the factors discussed above, you can make an informed and balanced decision that suits your business goals and needs.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?