Glossary

What is Offshoring?

Offshoring is a process of a business practice that hires a third-party company from a foreign country to relocate certain operations of the company. It's a cost-cutting approach in which some operations are outsourced to companies or individuals situated outside of the country where the company's headquarters are located.

What Is Offshore, Exactly?

It is normal practice in a diversified global economy to outsource sections of a corporation. Companies engage third companies to manage areas of their business that they believe are superfluous, expensive, or just outside their expertise. Employing third parties to take on these responsibilities allows companies to focus on their core business while saving money in most cases. On the other hand, offshoring is a type of call center outsourcing that involves companies based in other countries. These offshore companies are frequently hired by businesses because their country settings allow them to make things at a lower cost. Offshoring focuses on several areas. It includes customer service, IT support, and another portion of the business that can easily be offshored to enhance profitability. Additionally, it has a major disadvantage i.e., quality control. To maintain the brand's quality, businesses with offshore suppliers must build a proper quality framework that allows these foreign organizations to produce a high-quality product or service.

Types of Offshoring:

Consider the following two types of offshoring that are mentioned below. Have a look at them!

1. Production Offshoring:

Production offshoring refers to when a company establishes a manufacturing plant in another nation to import finished items for sale in the domestic market. For example, a company that makes heavy machinery might set up a plant in a country where there is a plentiful supply of iron and local labor that is both cheap and skilled at the job.

2. Service Offshoring:

A company engages in offshore service by establishing units in other countries to do service-related operations like customer service, information technology, marketing, human resources, accounting, and sales. For example, a software company might relocate its research and development unit to a country with highly skilled technical personnel at a lower cost than the home country.