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Furniture

Hidden costs of outsourcing furniture production

American furniture manufacturers are increasingly outsourcing furniture production from low-wage countries, especially China. While outsourcing may seem to be an effective way to cut down on manufacturing costs, there are hidden costs and risks involved with outsourcing that must be considered. The furniture research unit are conducting a study to elucidate these hidden costs. The two-year study was initiated in March of 2006 and is sponsored by USDA Forest Service, the Franklin Furniture Institute, and the Forest and Wildlife Research Center. Through and extensive literature review, researchers have identified seven major issues associated with outsourcing. By conducting surveys of manufacturers, they then quantified the most important and costly issues. Quality issue costs were ranked number one with an average of $600 thousand dollars spent annually. Global complexities and business ethics issues each cost manufacturers an estimated $250 thousand dollars per year. Though legal system issues had the lowest ranking impacts, they still cost manufacturers an estimated $30 thousand dollars annually on average. While all of these issues factor into unexpected costs for manufacturers, outsourcing is still cheaper than domestic production. This study has illuminated many aspects of outsourcing some companies may not have been prepared for. By detailing and clarifying each issue and its associated costs, the researchers can provide furniture manufacturers with better information on which to base future decisions. Mississippi State University