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Outsourcing

Posted on April 26, 2016 by Sunny South News

By Loraine Debnam

In big red letters the title on the poster read, “Stop Outsourcing…”
Although the word was familiar to me, I wasn’t really sure why it should change my shopping habits and would that make any difference in the general scheme of things?
Outsourcing involves contracting out a portion of business processes to another party and dates back to the early 1980s when companies were looking for methods to increase their market share and improve their bottom line.
It began as a way to streamline productivity by using the economics of large scale supply and the purchasing power of bigger corporations. It was hyped as a solution to allow for a better focus on the core expertise of a business — a way to improve costs, quality, service and production and delivery speed.
On a national level, it made good business sense to outsource warehousing, distribution, and transportation requirements — while maintaining the control of the manufacturing aspect of the business.
The computer programs alone (which are necessary to interface all these departments) upgrade and change so rapidly the costs can be prohibitive for any single enterprise.
In the past 30 years with the advent of even greater globalization, sending work to foreign countries began to look attractive to many CEOs and shareholders — where the workforce earns so much less than here.
Information Technology conglomerates such as Hewlett-Packard and IBM were among the first to embrace this new philosophy, not just for their manufacturing processes but also for service and call centres.
Service jobs required minimal training and very little capital investment. Some automobile and aerospace companies then moved their design and engineering requirements to firms abroad, which specialize in these areas.
The added bonus was there were no expenses for training, pension plan requirements, employment taxes or health insurance plans. The downside to this, of course, is there were no local, provincial or federal income dues to be submitted. Many jobs were lost.
The way I see it, the profit increases were coming from the destruction of someone else’s livelihood.
The result was a serious reduction in taxes being collected, as well as contributions to CPP, health care, unemployment insurance (when the demand was becoming even greater).
Politicians are now beginning to rethink the entire idea and are moving toward limiting tax breaks and government assistance to outsourced industries.
In Canada there are no specific national or provincial laws to regulate outsourcing to foreign countries. In the IT and communications area, data protection is a patchwork of federal and provincial laws, many of which only relate directly to individuals and particular segments of the industry.
I must admit I was a little skeptical when I read it is expected companies will conduct due diligence and assess any risks that may come with loss of confidentiality or (if necessary) disaster recovery. Notification to and/or approval by any level of government is rarely required.
Having done all this reading and research, I don’t think I’ve come to a definitive conclusion. There are ethical concerns, privacy issues and economic pitfalls on both sides of the debate.
It’s a matter of personal and individual purchasing choices. For me, I think it will be a case of checking labels more closely and trying to buy items “made in Canada” wherever I can.

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