Final answer:
Shifting from domestic to offshore production likely leads to increased in-transit and safety stock costs while potentially decreasing production costs. This change also has broader economic implications, including those related to trade liberalization and the domestic job market.
Step-by-step explanation:
If a company shifts from domestic to offshore production, several implications for costs are likely to arise. First, in-transit costs are bound to increase, given the longer distances and more complex logistics involved when shipping finished goods over international routes, which may include congested street networks and/or jammed freeways. This stands in contrast to ideal locations near uncrowded freeways or with rail or water transport access which are more cost-effective. As production moves offshore, it is plausible that the safety stock costs will also increase to buffer against the uncertainty of longer transit times and potential disruptions in the supply chain.
While production costs may decrease due to cheaper labor and possibly less stringent regulations, other costs such as those related to tariffs, import quotas, or anti-dumping measures can affect overall cost dynamics. Transitioning to offshore production has a complex impact on a company's finances; it can lead to economic gains from trade liberalization, but also to unemployment and changes in market structure, as some factories may close due to international competition.