Module 3

Offshoring is when a company moves a whole factory to a location overseas. This may sound like outsourcing, but outsourcing is more limited to in-house functions. When a company outsources they are only contracting out the in-house tasks to another company overseas. This work is then reintegrated back into the company from which it came. Offshoring keeps all the work inside the company and relocates or builds a new factory in another country. These overseas factories can create the same product using the same resources with cheaper cost in labor, employee benefits, and not to mention lower taxes.

Running a company that utilizes offshoring can have some new traveling and shipping costs that come in result to having large distances between multiple factories. When a CEO has to travel from Salt Lake City to a factory in China instead of a one that is in state, the plane ticket dramatically increases. In almost any industrial company a large amount of goods are shipped between their multiple factories. When these companies decide to expand overseas the cost of shipping is considerably larger.

A supply chain is collaboration between manufacturers, retailers, and of course customers. The supply chain starts with a manufacturer. The manufacturer sells their product to a retailer who then sells the product to customers. The supply chain can consist of as many manufacturer and retailers as needed. Any retailer, like Wal-Mart, that doesn’t produce most of the products being sold, run their business off of a supply chain.  In most cases the proficiency and success of the retail business is based off how well they execute their supply chain.

According to Friedman, no retail company has been more efficient at improving its supply chain than Wal-Mart.  Wal-Mart climbed its way to the top by being smarter and faster about bringing in new technology to increase the efficiency of their supply chain. They figured out the faster you get information from stores about what customers are buying, the faster you can get that information to your manufacturers. This allows manufacturers to recalibrate the production of their products with the supply and demand information given by Wal-Mart. With more visibility into each and every process in a supply chain, Wal-Mart is able to catch mistakes or reroute a product depending on its demand. Using an RFID tag they can track almost every little thing packages and pallets go through or are encountering.  Friedman explains, “If a grocery item has to be stored at a certain temperature, the RFID tag will tell Wal-Mart when the temperature is too high or too low.”  The crazy part is this tag, containing a multi-functional microchip, only cost 20 cents.

Due to the internet, an incredibly large amount of shopping is done online.  Almost all large and even small companies have taken advantage of this new marketing source. Unless a customer knows the exact URL of the company’s website they have no way of finding it, and that is with the condition that they even knew which company sold the product they needed. With Google all of this is alleviated. A customer can go onto Google and type in the product and not only get one website that carries their needed product but a massive list of all the companies selling this product. This allows businesses to reach out to a much larger range of audience. From the creation of Google, another form of competition came about called SEO, which is search engine optimization. Depending on a website’s SEO, it could either be last on the list or at the top of the list. Before Google the only way you would know that Target sells a particular book would be if you went to the store or someone told you the store sold it, and if you wanted any information about the store you would have to flip through a phone book.