Case Summary Businesses have long sought new and innovative ways to lower their costs for producing goods and services. Sometimes their quest includes buying raw materials and equipment from overseas suppliers for lower prices. Sometimes they might borrow from foreign lenders who are offering lower interest rates than can be obtained domestically. But for the last several decades, at least, the focus has been on moving jobs to countries where labor costs are low. This practice is called offshoring. Indeed, it seems like just yesterday that manufacturers were moving their production facilities to Mexico. The North American Free Trade Agreement (NAFTA) made it relatively painless for businesses to move materials and finished goods back and forth across the U.S. Mexico border as needed. But the good times slowed beginning around 2003 as Mexican wages crept higher and higher. At the same time, though, China began to emerge as the world’s newest low-cost manufacturing center. And for the next decade China’s burgeoning manufacturing prowess firmly established that country as the low-cost manufacturing hub. But sometimes history has a way of repeating itself. As China’s economy boomed local workers demanded—and received—higher wages. Not surprisingly, then, some firms that once abandoned Mexico for China started to reverse their course. Will Mexico be the last stop for these firms? Probably not, because for low-cost manufacturers it generally pays to be where the lowest labor and materials costs are located. But now, at least, Mexico seems to be rising once again. Think It Over What can these examples tell us about the pros and cons of offshoring? What conditions might cause a country’s labor costs to remain low for an extended period of time?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Case Summary
Businesses have long sought new and innovative ways to lower their costs for producing goods and services. Sometimes their quest includes buying raw materials and equipment from overseas suppliers for lower prices. Sometimes they might borrow from foreign lenders who are offering lower interest rates than can be obtained domestically. But for the last several decades, at least, the focus has been on moving jobs to countries where labor costs are low. This practice is called offshoring.
Indeed, it seems like just yesterday that manufacturers were moving their production facilities to Mexico. The North American Free Trade Agreement (NAFTA) made it relatively painless for businesses to move materials and finished goods back and forth across the U.S. Mexico border as needed. But the good times slowed beginning around 2003 as Mexican wages crept higher and higher.
At the same time, though, China began to emerge as the world’s newest low-cost manufacturing center. And for the next decade China’s burgeoning manufacturing prowess firmly established that country as the low-cost manufacturing hub. But sometimes history has a way of repeating itself. As China’s economy boomed local workers demanded—and received—higher wages. Not surprisingly, then, some firms that once abandoned Mexico for China started to reverse their course.
Will Mexico be the last stop for these firms? Probably not, because for low-cost manufacturers it generally pays to be where the lowest labor and materials costs are located. But now, at least, Mexico seems to be rising once again.
Think It Over
- What can these examples tell us about the pros and cons of offshoring?
- What conditions might cause a country’s labor costs to remain low for an extended period of time?
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