Insourcing
Encyclopedia
Insourcing is the opposite of outsourcing
; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies.
An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production
to reduce costs of taxes, labor, transportation, etc.
To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia
, Germany
and Ireland
.
Insourcing may be done by "onshoring." Insourcing delegates certain work to a different company, which may come from a different country in the case of onshoring.
As is common with new terms, ambiguity persists about the most appropriate use of insourcing and onshoring. Not necessarily correctly, insourcing has described just its subset of onshoring cases: The Organization for International Investment, a Washington, D.C. trade association, uses insourcing to describe the creation of jobs through foreign direct investment within the United States. Onshoring has described cases with no foreign direct investment: Onshoring has described just a company's decision to stop outsourcing, returning work to home country employees within the company or insourced from another home country company, according to the McKinsey Global Institute, which is the official "business and economics research arm" of McKinsey & Company, a global management consulting firm http://www.mckinsey.com/mgi/publications/us_jobs/pdfs/MGI_us_jobs_full_report.pdf.
Researchers take note: These terms may evolve. The prefixes to "-sourcing" and "-shoring" remain in flux: Outsourcing gave rise to the term in-sourcing, and offshoring resulted in on-shoring. However, onshoring is sometimes called in-shoring. In time, the McKinsey Global Institute's description of releasing offshore ties to keep jobs at home may become simply onshoring, while attracting foreign direct investment into a company's home country may become inshoring of such FDI. For now, any research into insourcing should include searchs into its subsets of onshoring and inshoring, which some still use interchangeably.
Outsourcing
Outsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but 'stand-alone') entity that specializes in that operation. Insourcing is a business decision that is often made to maintain control of critical production or competencies.
An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.
Insourcing is widely used in an area such as production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
to reduce costs of taxes, labor, transportation, etc.
To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. Countries with a net deficit in business services include Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
, Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
.
Insourcing may be done by "onshoring." Insourcing delegates certain work to a different company, which may come from a different country in the case of onshoring.
As is common with new terms, ambiguity persists about the most appropriate use of insourcing and onshoring. Not necessarily correctly, insourcing has described just its subset of onshoring cases: The Organization for International Investment, a Washington, D.C. trade association, uses insourcing to describe the creation of jobs through foreign direct investment within the United States. Onshoring has described cases with no foreign direct investment: Onshoring has described just a company's decision to stop outsourcing, returning work to home country employees within the company or insourced from another home country company, according to the McKinsey Global Institute, which is the official "business and economics research arm" of McKinsey & Company, a global management consulting firm http://www.mckinsey.com/mgi/publications/us_jobs/pdfs/MGI_us_jobs_full_report.pdf.
Researchers take note: These terms may evolve. The prefixes to "-sourcing" and "-shoring" remain in flux: Outsourcing gave rise to the term in-sourcing, and offshoring resulted in on-shoring. However, onshoring is sometimes called in-shoring. In time, the McKinsey Global Institute's description of releasing offshore ties to keep jobs at home may become simply onshoring, while attracting foreign direct investment into a company's home country may become inshoring of such FDI. For now, any research into insourcing should include searchs into its subsets of onshoring and inshoring, which some still use interchangeably.
See also
- InshoringInshoringInshoring may be thought of as the 'opposite' of Offshoring. It is the business process outsourcing work domestically. This process typically applies to the US and the UK....
- OffshoringOffshoringOffshoring describes the relocation by a company of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Even state governments employ offshoring...
- OutsourcingOutsourcingOutsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
- Vertical integrationVertical integrationIn microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
- Regional insourcingRegional insourcingRegional insourcing is a process in which a company establishes satellite locations for specific entities of their business at cites that are away from their headquarters. Through this process, companies can take advantage of the benefits one state may have over another Regional insourcing is a...
Further reading
- Insourcing Top 50 2008 - Organization for International Investment http://www.ofii.org/docs/Insourcing_50_2008.pdf
- Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data Jackson, J. K. (2008). Outsourcing and insourcing jobs in the U.S. economy: Evidence based on foreign investment data (RL32461). Washington, DC: Congressional Research Service. http://digitalcommons.ilr.cornell.edu/key_workplace/520/http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1525&context=key_workplace