In my Design and Management of Supply Chains class at Penn State (SCM450W), students are assigned Scotts Miracle-Gro: The Spreader Sourcing Decision. The case surrounds the decision of whether to outsource a product or keep production in California. The students are charged with performing a discounted cash flow (DCF) analysis and provide a recommendation to management. What I really like about this case is that the DCF is full of assumptions and tiny adjustments here and there can change the decision completely.
GE has decided that the decision they made to outsource in years past was not the correct one to make. They are shifting production back to the US. This is great news for unemployed workers in the US but also for the average consumer. One product, the GeoSpring water heater, can actually be produced cheaper in the US than abroad. Benefits include moving production closer to the design team, lower safety stock levels, and lower inventory in transit, among many others. Expect to see many companies rethinking their outsourcing decisions and an insourcing trend to develop in the coming years. Let’s just hope the pendulum doesn’t swing too far too the insourcing side and we see a reverse of the outsourcing fad. Companies need to do a careful calculation of the costs, benefits and risks and choose insourcing and outsourcing accordingly.
http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/?single_page=true#
Credit to Ryan Donahue, a Project Engineer in Tulsa, Oklahoma, for bringing this article to my attention.