With millions of jobs in the USA lost in 2008 and things looking bleak so far in 2009 – 71,400 jobs were lost on Monday alone – one wonders what the US workforce of the immediate future will look like. With tons of people out of work and available jobs scarce, some experts predict that people are going to have to work for less money and that the standard of living will decline.

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While the US’ high labor costs of the past prompted many organizations to outsource jobs to offshore providers, this potential “adjustment” to US labor costs may cause onshoring to be the new approach to cutting costs. Late last week, I received a letter from one of our vendors discussing how and why they were doing away with their offshoring approach in favor of an onshoring approach. I’ll share that letter here, with the vendor’s name omitted to protect their privacy:

Dear Valued Customers,

I wanted to write this letter to update you on a exciting change that is happening here at [vendor name]. For the past 8 years, [vendor name] has leveraged a mix of U.S and offshore staffing for many of its projects. This was done to stay competitive and provide the best value for our customers. [vendor name] is well aware of your concerns over the years that mainly deal around project timelines. After many attempts to resolve timeline concerns, [vendor name] has decided to move to a full onshore development model that will provide the speed and quality each and every customer deserves. This change has been in the works for months and we now encompass a full development staff in-house and also use of U.S contractors as needed. Our goal is to continue to hire additional in-house programmers in a ongoing basis within [vendor name] as we continue to grow.

Up until now, cost had been a prohibitive factor in our ability to do just this and stay competitive in our project pricing. However, after working with both onshore and offshore teams for years and assessing their turn-around times, skills, accuracy rates and overall understanding of projects, we have determined that it is more cost effective to have fewer senior level U.S. staff rather than many offshore employees. In making this change, we have been able to provide faster turn-around times, lower quoted hours and costs, higher quality work, shorter project timelines and more involvement for our clients with their assigned developers.

Unfortunately because of this move, it has been brought to our attention that a former offshore staff member is attempting to slander and undermine [vendor name] and its customers. Please be advised that these emails are coming from a disgruntled staff member that was terminated for just cause and is looking to make fraudulent claims for his own gain. His departure signals this change for the better and a new era here at [vendor name]. We are committed to providing our customers the best solutions at a competitive price point.

We are excited to be making this move and have no doubt our clients will soon notice the difference!

While this letter seems to tout the non-price advantages of onshoring, I have no doubt that the large amount of highly skilled and widely available US labor and the relatively lower wage rates were a factor in this vendor’s decision.

So what do you think? Is onshoring about to go mainstream?

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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