Many companies around the world, including those in the US, have outsourced goods and services to India and China. However, some of these businesses have reversed course and are now insourcing these goods and services. Do you agree that this course reversal may be justified?

To answer this week’s topic properly, the definition of what outsourcing and insourcing actually is needs to be addressed. Outsourcing is when a good or service is purchased from a supplier outside of the country. There is also domestic outsourcing which is still the same as regular outsourcing, but it is sourced outside the firm inside the same country. Insourcing is when the firm is making their goods and services "in-house" versus purchasing the products elsewhere.

When changing from outsourced goods to insourced goods there are lots of factors that need to be considered and weighed. When making the products "in-house" the firm has better control over the cost and can better budget for the future, whereas outsourcing could get into a situation where a product tripled in price without ever being aware of it coming. At the same time the fixed cost that are associated with the purchasing of goods from outsourcing can be lost with more variable cost. Another consideration is the location, take Tesla for example. If they are getting their batteries from oversees, they are not only paying for the cost of the product but also the shipping cost. This also brings in the variables of such things as politics, like the current and past situation of tariffs that are placed on goods that are imported from other countries.

Insourcing in the United States has become more favorable in recent years to the growing economy of such countries like China and India. This has caused the outsourcing for things such as labor to no longer be cost effective.