Understanding Outsourcing (part 2/3)

Domestic Outsourcing

Domestic outsourcing refers to outsourcing where both the primary company and the independent contractor or subsidiary are located in the same country. One of the main reasons for outsourcing is to reduce costs but it is not always necessary to outsource work overseas to reduce costs. Cost savings will be discussed in greater detail in the section on the benefits of outsourcing but essentially outsourcing results in a savings as a result of a reduction of labor costs.

Overseas Outsourcing

Overseas outsourcing is the type of outsourcing most people already understand. This is where large corporations such as Nike, and even some smaller companies, employ manufacturing plants overseas in third world countries to upsize their profits. This is significant because their costs including wages, materials and building lease would be considerably higher in the United States than they are in these other countries.