Supply Chain Managers Target U.S. Cities for Onshoring Opportunities

Many mid-size U.S. cities and other areas now make attractive alternatives to India and other offshore locations for companies considering consolidating finance, IT, and other business services operations for shared service or global business services centers, according to new research from The Hackett Group, Inc.

The diminishing gap in labor costs, combined with factors such as lower turnover rates, greater business knowledge, proximity to customers and headquarters, and state tax incentives has created conditions where many companies are now seriously considering U.S. locations, particularly for centers handling complex and higher-value processes, the research found.

Verizon Communications is one of many companies that has made the decision to locate business services operations domestically, consolidating nearly 1,500 finance operations staff into two U.S. service centers over the past two years.

The Hackett Group's Global Business Services Executive Advisory program developed the research, which provides detailed rankings for more than 30 cities across the U.S., based on a weighted mix of factors. Top 10 cities in the research are: Syracuse, NY; Jacksonville, FL; Tampa, FL; Lansing, MI; Grand Rapids, MI; Atlanta, GA; Allentown, PA; Green Bay, WI; Richmond, VA; and Longmont, CO.

Previous research by The Hackett Group has found that while offshoring has led to a dramatic decline in the number of corporate IT, finance, procurement, and HR jobs in the U.S., the number of new business services jobs moving offshore has declined steadily over the past few years and will continue to do so, as companies reach the practical limits of the type of work in these areas that can be effectively offshored.

“Companies are realizing that the U.S. is becoming an increasingly viable option for elements of their service delivery organization, and we're seeing real growth in this sector, with nearly 700 U.S. centers of excellence, shared service centers, and global business services operations now up and running,” said The Hackett Group Principal and Global Finance Executive Advisory Practice Leader Jim O'Connor.

He adds that Labor and operating costs are still high in the U.S. compared to Eastern Europe, Latin America, and Asia. But the gap is shrinking, and there are significant other benefits.

“In more and more cases, those benefits outweigh the additional cost. In addition, the public response to offshoring has made keeping jobs ‘at home' a attractive option for U.S. companies,” he says.

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