Certified Supply Chain Professional (CSCP) Practice Exam

What does offshoring refer to?

1. Transferring technology across borders

2. Outsourcing to a different country

3. Importing goods from various countries

4. Establishing an international headquarters

The correct answer is: Outsourcing to a different country

Offshoring specifically refers to the practice of relocating certain business processes, functions, or production activities to a different country, often to capitalize on cost advantages, such as lower labor costs, or to access specialized skills, resources, or markets. This strategy allows companies to improve their overall efficiency and competitiveness in the global marketplace. When a company engages in offshoring, it typically involves transferring some of its own operations or processes to a foreign market, rather than just contracting with another company in the foreign location (which would be outsourcing without the aspect of relocating operations). This distinction helps to clarify why outsourcing to a different country is considered the correct definition of offshoring. Other options touch on related concepts but do not accurately encapsulate the definition of offshoring. For example, transferring technology across borders pertains more to technological exchange rather than the movement of operational activities. Importing goods refers to the procurement of products from abroad, while establishing an international headquarters focuses on corporate governance and management, rather than the operational shifts associated with offshoring.