Insourcing or Outsourcing: Which Is the New Staffing Trend?

Scroll down to read more!

Insourcing or Outsourcing: Which Is the New Staffing Trend?

Scroll down to read more!

Table of Contents

Outsourcing”, also known as “offshoring” has been one of biggest trends of American business in the last several decades. It is even discussed in the SHRM certification materials as an area HR students need to understand. However, due to a number of reasons that trend is changing. A well-known futurist even says “insourcing” will become the next big macro trend in business and will drive many changes.

Why the reversal?

A June 2013 issue of The Economist and the December 2012 issue of The Atlantic both discussed article the reversal of the offshoring phenomenon started by Jack Welsh of GE. In fact it is being changed by GE, only this time led by Jeff Immelt. Immelt is even quoted as saying it was “yesterday’s model.” The articles said there are several reasons driving the reversal. These include:

Political- Politicians are tired of getting beat up for letting jobs exit the U.S. The perceived loss of jobs had a rallying effect at the ballot box. I say “perceived effect” because the article said that offshoring really didn’t have as much impact as people thought. They said more jobs have been lost to software as to foreign workers. But the perception of loss to foreign workers is a powerful image.

Economic- Changes in high technology have made the allure of cheaper labor in other countries less attractive. Additionally, in many of these countries the labor is not as inexpensive as it has been in the past. The time savings in shipment of products is another reason. Having inventory in the pipeline to cover for two months of shipping time is expensive. The quality of product is another. Companies are finding collaboration between companies helps offset cheaper labor. Also because of automation the labor component of the formula is no longer as big. In many cases the reason many U.S. companies continue to have facilities overseas is to be close to emerging markets as opposed to labor savings.

Insourcing will be the next major Recruiting Trend!

Futurist Thomas Frey has said that “insourcing” will be a major trend in the future. He identifies a number of reasons. I am going to focus on the reasons that are HR related. These include:

Unions have been forced to face reality. Very high wages made business disappear in the past. Subsequently many, such as the unions at GE, had to accept a two tier wage system. (This means that newer workers come in at lower wages than legacy workers.) As Frey says “70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.” This, coupled with wages in China now being five times higher than they were a decade ago, convinces companies to have work in the U.S.

American businesses have become much more efficient. Between automation and robotics American workers have had to become more effective and efficient. Frey says “U.S. productivity continues to find gains through efficiency, and labor costs have become a smaller and smaller proportion of the total cost of finished goods. It’s far more difficult to save money by chasing wages anymore.”

In today’s market U.S. companies have to be more responsive. The combination of how quickly products need to get to market and the distances they had to travel has made responsiveness a necessity. I think many people have also gotten tired of poor products from China. This has led to an increase in what Frey calls American craftsmanship. “Engineers who work directly with manufacturing personnel are able to build a far better product. In one example…a design team was able cut the work hours necessary to assemble a water heater from 10 hours in China to two hours in Louisville, KY.

Frey concludes “Look for ‘insourcing’ to be a long term trend. It certainly won’t work in all industries, and it may not even work in most. But the playing field has shifted, and those who aren’t paying close attention may soon end up as little more than a footnote in the annals of business history.”

Food for thought

As an HR professional here are some things you need to consider:

  • How do you see your industry shifting?
  • Do you see some competitive advantages shifting in your direction by the fact that work is coming back to the U.S.?
  • Are there opportunities to drive your industry or at least your company in that direction?
  • Do you understand you will need to have a handle on how technology is currently affecting your industry?
  • Do you talk to your engineers? They can help you understand where your technology is headed.

Once you have done that you will be much better prepared to handle the HR aspects of this change.

Did you like this post? Share it!

A Word From Our Sponsors

Ads help make Workology resources free for everyone. We respect your privacy. To see our Privacy Policy click here.

Recommended Posts

12 Types of Paid and Unpaid Leave and Time Off

A list for the HR professional to be able to answer employee questions related to time off....
Places to visit while in Chicago for the #SHRM13

Top 10 Must Sees in Chicago During #SHRM24

Must Sees in Chicago at the 2024 SHRM Annual Conference We’ve taken the stress out of planning and done all the work for you....

The Debate on Social Media Policies and Disclaimers The Debate on Social Media Policies and Disclaimers The Debate on Social Media Policies and Disclaimers The Debate On Social Media Policies and Disclaimers

5 Employee Twitter Bio Disclaimers You Should Add Today

Learn the top five Twitter (X) bio disclaimers every HR professional needs to protect personal and professional interests on social media....

How to Calculate FLSA Overtime Pay

Understand the Fair Labor Standards Act and learn how to calculate FLSA overtime pay to avoid any mistakes....
Discover the Best of Chicago

Top 10 Things to do in Chicago

Check out our free Yoga for HR class and take a break from #shrm24 at www.yogaforhr.com. Top 10 Things to do in Chicago Chicago...

Successful SHRM recertification

Your Path to Successful SHRM Recertification

Navigate your SHRM recertification journey with our guide. Uncover the process, benefits, and tips for successful career advancement in HR....
Your Guide to Easy SHRM-CP Recertification

Your Guide to Easy SHRM-CP Recertification: Stay Certified

Master SHRM-CP recertification with ease! Uncover the steps, credits, and strategies to maintain your HR credential and excel in your career....

Going Paperless: Transitioning to a PDF-Based Workflow for Enhanced Efficiency

Going Paperless: Transitioning to a PDF-Based Workflow for Enhanced Efficiency Every day, we juggle deadlines, manage information overload, and constantly seek ways to streamline...

Checkout Our Products

Ads help make Workology resources free for everyone. We respect your privacy. To see our Privacy Policy click here.

More From Workology

Your Guide to Easy SHRM-CP Recertification

Your Guide to Easy SHRM-CP Recertification: Stay Certified

Master SHRM-CP recertification with ease! Uncover the steps, credits, and strategies to maintain your HR credential and excel in your career.

Navigating Career Change: Transitioning from HR to a New Career Path

Thinking about leaving HR for a new career? It happens to the best of us. Here's what you should consider first.

5 Effective Employee Training Methods for 2024

Click on read more to open this post on our blog.

HR Certification Podcast Episode 15: Reviewing Employment Law for HRCI & SHRM Exams

In this episode of the HR Certification Podcast, we review employment law topics including adverse impact and the four-fifths rule.