Unsure Offshore

Recent headlines raise doubts about outsourcing

When we last took an in-depth look at outsourcing, in our Summer 2006 issue, we spoke with entrepreneurs who had struggled to find the best place to make their products. Those who were committed to manufacturing in the U.S. cited a variety of reasons, among them turnaround time, quality, pride in American accomplishments, and a desire to create jobs at home. Other entrepreneurs had persuasive reasons—mostly financial—to manufacture offshore. They said they couldn't survive if rivals took advantage of cheap overseas manufacturing while they stayed stateside.

None, however, mentioned safety. And the debate about outsourcing has since changed from one primarily about costs to one in which safety plays a major role. Even after scandals involving pet food, toothpaste, and toys, it was probably the saga of Foreign Tire Sales that best showed what could happen to a small company unable to keep close tabs on its overseas manufacturing. FTS, with 13 employees, had to recall about 450,000 tires it had made in China. Now FTS is trying to get some form of restitution from its Chinese manufacturer. The estimated cost of the recall: $90 million.

Clearly, it's time for another look at outsourcing. It's easy to get caught up in the philosophical debates around the issue. But those debates leave one urgent question unanswered: If you outsource manufacturing to a factory in a country you may rarely visit, staffed by people whose language you do not share, how do you know your products are safe? It's a question many entrepreneurs are asking, and one that Staff Writer Jeremy Quittner answers admirably.

By Kimberly Weisul, Editor, BusinessWeek SmallBiz

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