Risk of Nationalization
Developing economies and those countries with political instability may also pose an operational risk to offshore manufacturers, due to uncertain outcomes and changing attitudes towards foreign companies doing business there. Several South American countries and Mexico are good examples where industry nationalization, tighter restrictions on capital investment and repatriation, and uncertainty regarding their long-term treatment of foreign companies weigh heavily on the decision to keep production offshore.
Intellectual Protection
Today’s manufacturing is heavily reliant upon new ideas, the intangible knowledge capital that fosters tomorrow's products. The legal use of intellectual property, which includes trusted offshore partners, is constantly under attack by individuals, corporate entities or governments who ignore IP laws and standards. In the absence of worldwide standards for IP protection, companies must make use of patents, trademarks and copyrights, but even with those protections, they are still at risk. Protecting IP abroad and finding remediation can be a costly undertaking, with patent enforcement and injunctive relief slow or lacking, potentially falling short of a fair solution. More troubling are instances of infringement and outright theft of IP of a sensitive nature, potentially exposing the holder to legal or non-compliance risks.
Speed to Market
Companies are challenged to maintain leaner inventories in today's highly cost-sensitive markets. Speed to market is becoming more critical for innovators and OEM’s who are seeking to capture every competitive edge they can. Yet offshore manufacturing presents unique challenges that strain this new imperative. Markets such as Vietnam offer lower labor costs, but lack the reliable supply chain required for today’s technology-intensive products, including the raw materials, sub-assemblies or the automated or certified manufacturing processes needed to maintain necessary production levels.
