Analysis of the environmental effects of international outsourcing: Study of the iron casting industry

Abstract

The international outsourcing of intermediate products is a common practice in manufacturing. Although outsourcing labor- and resource-intensive production to developing countries is based on financial motives, the decision should also be evaluated from an environmental perspective at a global scale. In this study, the environmental effects of four supply chain scenarios are analyzed through a life-cycle assessment (LCA) of a cast iron component. The study reveals that when upstream manufacturing activities are performed in Mexico, the Global Warming Potential (GWP), Ozone Depletion Potential (ODP) and ecotoxicity levels might be comparable with those of manufacturing activities performed in the U.S. However, in China- and India-based outsourcing scenarios, the GWP, ODP and ecotoxicity levels are two to three times higher than those of U.S.-based scenarios. The main causes of the higher levels of GWP, ODP and ecotoxicity in China and India are related to differences in the amount of scrap metal usage, sources of electricity generation, transportation modes, material transport distances, and emissions control practices. Key words: Life cycle assessment (LCA), global warming, ozone depletion, ecotoxicity, international trade, metal casting.