**4. Pandemic offshore-outsource tradeoff**

The pandemic has been a wake-up call for outsourcing-offshoring economies; why was the US manufacturing industry unable to supply the necessary materials like face masks, medical ventilators, and PPE? Taken together, the US and other advanced industrial economies have evolved a highly efficient and productive product manufacturing-and-delivery system that provides them with a cornucopia of products at relatively low costs. However, inherent to that system are dependencies and expectations that have been called into question by the pandemic. Such performance has fuelled politicians and policymakers to advocate for a reduction in the outsourcing-offshoring business—cementing President Trump's call to bring the production industry back from overseas.

The US alone reduced the corporate rate from 35–21% to encourage companies to re-offshore. Besides that, some US policymakers are proposing a \$25 billion fund for companies to re-offshore/re-outsource back to the US from China for the next five years [16]. Companies like Telstra™ in Australia that depend heavily on the Philippines have enacted plans to hire more than 3500 workers back home [17]. At a glance, COVID-19 is likely to deaccelerate outsourcing-offshoring businesses. However, the issue is complex and defies easy solutions, as discussed in the following offshore-outsource tradeoffs.

#### **4.1 Offshore-outsource vs. onshore skills**

The challenge lies in a combination of how modern supply networks are structured and the operational metrics that apply to manufacturers. Gone are the days when one giant manufacturer, like CAT™ or Toyota™, could design, manufacture, and assemble the components needed to make a product. Today's manufacturing technology is too complicated to have all the skills in one place. Thus, manufacturers have resorted to outsourcing-offshoring to search for those missing skills at a lower cost. Even something as simple as a lightbulb has components like LED lights that must be made in high-tech industries. Day-to-day equipment like smartphones, computers, and medical equipment contain components that require a great deal of precision and accuracy, and that need considerable training and experience.

During the pandemic, among the items in most demand were PPE (e.g. masks and gloves) and ventilators; the latter being the most technical that requires detailed skills and experience to manufacture. A ventilator blows air and oxygen into the patient's lungs, preventing them from collapsing. They are complicated pieces of machinery that cannot be created or grafted quickly. At the start of the

**109**

*Offshoring-Outsourcing and Onshoring Tradeoffs: The Impact of Coronavirus on Global Supply…*

South Africa (SA) was the most affected country in Africa, with almost 750,000

Similarly, the development of a vaccine is one of the critical measures to mitigate the effect of COVID-19. However, very few countries could respond with the required expertise, capacity, and abundant resources. This is mainly because vaccine productions methods place certain requirements on the supply chain that include, but are not limited to, novel skills set, meticulous maintenance, production equipment, and ultra-cold chain storage and shipping process. These rigorous requirements have left many countries with the option of outsourcing the service from leading foreign organisations [20]. Storage is a key part of the vaccine process and requires precise conditions of light, glass vials, and a specific −80°C across the entire supply network to preserve and maintain the effectiveness of the vaccine. The nature of vaccine supply means that there are often several places (warehouses and stores) where items have to be stored before they are finally delivered or administered to beneficiaries. Thus, this is another pandemic tradeoff between outsourcing vs. onshore skills vis-a-vis resources. In particular, the tradeoff is between the onshore skills related to vaccine production to ensure a rapid response and to prevent morbidity and mortality versus costly outsourcing; a demand which is most likely to exceed supply, and which will leave many nations vulnerable and defenceless.

Materials that feed the manufacturing industry are localised. The transport of raw materials from Uganda, the Philippines or Vietnam to outsourcing-offshoring economies could mean incurring high transportation costs. Besides, the stringent environmental laws in developed economies could make the processing of such materials practically impossible. Before the UK and US started practising outsourcing-offshoring of some types of business, they had some of the worst air pollutions in the world. The processing operations were sent to the likes of China and India, countries that are now experiencing the worst air pollution ever [21, 22]. Though outsourcing-offshoring countries have paid some price in terms of job losses, the

benefit of improved air and water quality somewhat outweighs the price.

cases of COVID-19 infection by November 2020. For years, South Africa has depended on the United Kingdom (UK) to outsource medical equipment, ventilators included. During the peak of the pandemic in Europe (end of March 2020), Penlon, the leading manufacturer of ventilators in the UK, could not supply SA, citing the incapability of the company to produce extra ventilators for the SA community. In addition, SA could not reproduce the ventilators due to patent rights. The situation reflects the dangers of relying on offshoring or outsourcing vital equipment. However, once SA was able to acquire the patent rights to produce the ventilators, the country did have the necessary skills to produce them. It took weeks for the SA government to find a local 'peep valve' manufacturer, a vital component that allows patients to exhale. The skills needed to produce a single medical ventilator range from fabrication, material processing and simulation to software coding, and such skills are hard to find in a single onshore organisation. Thus, to ameliorate production and meet the much-needed demand, outsourcing/offshoring, some of

pandemic, the US had 62,000 fully functioning ventilators and nearly 100,000 older model ventilators. With COVID-19 hitting every corner of the country, nearly a million ventilators were required to treat the patients [18]. A single ventilator contains hundreds of parts, and it takes days for an experienced team to make and assemble such parts to produce a ventilator. Ford and GM, leading car manufacturers in the US, spent over 30 days trying to organise the production lines and training

*DOI: http://dx.doi.org/10.5772/intechopen.95281*

workers to produce ventilators [19].

the parts and skills is the only viable option.

**4.2 Offshore-outsource vs. air pollution tradeoff**

#### *Offshoring-Outsourcing and Onshoring Tradeoffs: The Impact of Coronavirus on Global Supply… DOI: http://dx.doi.org/10.5772/intechopen.95281*

pandemic, the US had 62,000 fully functioning ventilators and nearly 100,000 older model ventilators. With COVID-19 hitting every corner of the country, nearly a million ventilators were required to treat the patients [18]. A single ventilator contains hundreds of parts, and it takes days for an experienced team to make and assemble such parts to produce a ventilator. Ford and GM, leading car manufacturers in the US, spent over 30 days trying to organise the production lines and training workers to produce ventilators [19].

South Africa (SA) was the most affected country in Africa, with almost 750,000 cases of COVID-19 infection by November 2020. For years, South Africa has depended on the United Kingdom (UK) to outsource medical equipment, ventilators included. During the peak of the pandemic in Europe (end of March 2020), Penlon, the leading manufacturer of ventilators in the UK, could not supply SA, citing the incapability of the company to produce extra ventilators for the SA community. In addition, SA could not reproduce the ventilators due to patent rights. The situation reflects the dangers of relying on offshoring or outsourcing vital equipment. However, once SA was able to acquire the patent rights to produce the ventilators, the country did have the necessary skills to produce them. It took weeks for the SA government to find a local 'peep valve' manufacturer, a vital component that allows patients to exhale. The skills needed to produce a single medical ventilator range from fabrication, material processing and simulation to software coding, and such skills are hard to find in a single onshore organisation. Thus, to ameliorate production and meet the much-needed demand, outsourcing/offshoring, some of the parts and skills is the only viable option.

Similarly, the development of a vaccine is one of the critical measures to mitigate the effect of COVID-19. However, very few countries could respond with the required expertise, capacity, and abundant resources. This is mainly because vaccine productions methods place certain requirements on the supply chain that include, but are not limited to, novel skills set, meticulous maintenance, production equipment, and ultra-cold chain storage and shipping process. These rigorous requirements have left many countries with the option of outsourcing the service from leading foreign organisations [20]. Storage is a key part of the vaccine process and requires precise conditions of light, glass vials, and a specific −80°C across the entire supply network to preserve and maintain the effectiveness of the vaccine. The nature of vaccine supply means that there are often several places (warehouses and stores) where items have to be stored before they are finally delivered or administered to beneficiaries. Thus, this is another pandemic tradeoff between outsourcing vs. onshore skills vis-a-vis resources. In particular, the tradeoff is between the onshore skills related to vaccine production to ensure a rapid response and to prevent morbidity and mortality versus costly outsourcing; a demand which is most likely to exceed supply, and which will leave many nations vulnerable and defenceless.
