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European companies are gradually relocating production back from Asia

A growing number of European industrial companies are moving their previously outsourced production closer to home.

Outsourcing activities to low-wage countries in Asia has been one of the biggest trends of the past three decades. By outsourcing some production to countries such as China and Bangladesh, or outsourcing aspects of customer service and software development to countries such as India, companies are able to increase revenue while reducing costs.

By using outsourcing, companies are able to gain a competitive advantage over competitors who retain jobs in more expensive labor markets.

In the wake of the coronavirus, executives have begun to look differently at the way supply chains are built. The recovery from the pandemic has been slowed by resource constraints due to problems in supply chains, and ethical criticism is mounting.

Today, manoeuvrability and flexibility have become more important than low labour costs.

The many disruptions to supply and logistics chains over the past two years — from the impact of the coronavirus to missing components to skyrocketing shipping costs — are prompting companies to overhaul their networks of factories and distribution centers.

Companies from Europe mainly see Central and Eastern Europe as possible production destinations. The Czech Republic, Poland and Hungary, along with the Netherlands, are also considered serious possibilities.

What do you personally think of this development?

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