Saving jobs by sending jobs abroad
My argument is that “Sending jobs abroad saves jobs”; or put another way, “Save jobs by sending jobs abroad.” The phrase “Send jobs abroad” during an election is as divisive as the issue of abortion. The idea that shipping jobs abroad can save jobs in the United States flies in the face of all reason, so how can this be possible? If you are a union member, factory worker, administrator, or manager in the United States, this article is for you.
There was a very effective negative TV commercial that aired during the California Senate race between Barbara Boxer and Carly Fiorina. The commercial mentioned the alleged 30,000 jobs Fiorina sent overseas while the CEO was at Hewlett Packard between 1999 and 2005. What the commercial didn’t mention was that when Fiorina did this, the economy was experiencing dot collapse. com and technology during the recession of 2000. Not to mention there was 911 which also set the economy back. As of October 2009, Hewlett Packard employees numbered more than 304,000; a dismissal of 30,000 people would have been around 10%; Sounds reasonable. What the article didn’t mention was the fact that she also hacked 3,000 handling potions.
A CASE FOR SAVING JOBS BY SENDING JOBS ABROAD: Why have companies made the painful decision to move their production overseas? As hard as it may be to believe, shipping US production to another country to lower the “Cost of Goods” is nothing new. The 1960s brought us an explosion of Made in Japan products. In the 1960s, shortly after World War II, “Made in Japan” had a negative connotation. The aerospace industry was shipping components to Mexico for assembly in the 1970s. In the mid-1980s, Wal-Mart’s “Made in America” slogan changed forever. Wal-Mart’s economies of scale and distribution made too much sense for Wal-Mart to become 10% of China’s GDP. The 1990s brought us the “North American Free Trade Agreement.” It is obvious that US industry has always focused on reducing material costs and finding a source of cheap labor.
Businesses have always focused on operational efficiency. Unfortunately, process efficiencies like the wave soldering machine and auto-insertion machine eliminated millions of thousands, if not millions of jobs. These two machines eliminated the welder’s career in the electronics industry. These two machines are a perfect example of how American factory workers have been replaced by efficiency. The impact these innovations continue to have on the electronics industry is priceless. It is not a question of going abroad; it is good management.
Using Case Study No: 1 as an example, we can see how a Toronto-based loudspeaker company could not be competitive using its own resources. Although they were vertically integrated, the cost advantage could not compete with the low cost of Asian labor. His labor rate couldn’t be competitive, even with his manufacturing advantage. Their domestic labor kept them out of the market. The combined vertical integration and expensive labor created a situation that made their products too expensive for the market, leading to lost sales. The Toronto-based loudspeaker company knew it needed to go overseas and have its product turnkey (completely finished), to compete in a market with tough margins.
The jobs that are saved by sending a product abroad are the following:
• Engineering: These positions are held when jobs are shipped overseas because it would be unwise to entrust your engineering to another company. Responsibility for risk would not be a small advantage. The companies are marketing, “Designed in the USA.” Radio Shack labels its products “Assembled in the United States from domestic and foreign parts.” They also label their product with the country of origin of the 100% foreign manufactured and assembled product.
• Industrial Designers: These positions MUST remain in the United States because our domestic market does not accept designs outside of Asia. American design will always win over Asian design. Simply put, domestic designers have a better idea of American trends than an industrial designer in the factory somewhere abroad.
• Sales and Marketing: These positions are kept alive by having products that are competitive in the marketplace.
• Shipping and Receiving – For obvious reasons, these positions are held because product flows from the factory to the warehouse and back to the retailers.
• Order Entry, Customer Service, and Accounting Departments – These departments are kept busy with their normal flow of paperwork. However, without competitive prices for their products, these departments could experience layoffs.
There is a win-win scenario for shipping a product abroad that works for everyone:
• Keep high-margin products in the United States. Although the profit margin will be higher, the volume will be lower, it’s just a fact.
o Transition abroad of the high-volume, low-margin product. This keeps our domestic workforce producing high-margin items.
o The level of factory domestic workers can be adjusted as time and volume prevail.
• Product development has always been a matter of resources, engineering resources, factory resources, availability of high-tech equipment, quality control facilities, and so on. Taking a product abroad can be a logistical solution. Depending on the size of your business, will you be more likely to determine the availability of such resources? However, taking your product abroad gives you instant availability of resources that you didn’t have at home.
o The quality of your product can really improve. The factories you would choose to manufacture your product will be more than an ISO9000 factory. There will be built-in procedures that will not allow your product to drift and be a loser.
o Because you will have specified “Quality Assurance” procedures for inspection leaving the factory. If the incoming inspection team on the domestic side finds that the product is outside the agreed quality control standards, the entire lot is rejected. Now that is risk management at its finest.
• The business has always focused on operational efficiency. Process efficiencies, such as the use of a wave soldering machine, automated inserting machine, or robots
o These efficiencies will only allow US industry a higher labor rate, up to a point. The construction industry reduces its labor costs by fabricating the product in the shop and bringing it to the construction site for erection at a higher labor rate. However, we have finally reached a point where higher technology and labor are affecting cost and moving production, or some production offshore becomes a necessary component of the modern business model.
Hurt feelings in America! Shipping Jobs Offshore! It has become more of a hot political issue than a reality. For more than half a century, the United States has been importing products from other countries. After World War II we were importing cheap products from Japan. Since then, we have imported products from Korea, Taiwan, Mexico, the Philippines, Malaysia, Vietnam, Singapore, just to name a few. The question is: In which third world country will the United States settle?
It has always been our way (those of us who build products outside our borders), to retire and move to another country once we raise the local standard of living and labor costs get too high. Time and time again, overseas manufacturing has picked up and moved to countries with an alternative labor source. We tend to withdraw and exploit various third world countries. It’s not just Americans doing this, after all, we are a global economy.
The bottom line is that we all have compassionate hearts and hate the idea that someone could suffer if they lose their job. However, shareholders are those whose best interest should be of utmost concern. If there are teams that can increase efficiency, then it is everyone’s responsibility to take the suggestion to management.
Making sure the company stays competitive in the marketplace should be job number one!
CASE STUDY #1: The speaker industry in North America was, at one time, an industry employing thousands of employees. From the factory workers to the support staff who accompanied them, the audio industry was an American industry. It still is, but it’s different than it used to be. The “After Car” audio market, for a long time, had to carry the “Made in USA” label. Once Wal-Mart made the decision to purchase products from abroad with the intention of hitting certain price points, “Made in the USA.” ceased to be important.
This mentality is the reason why the speaker industry in the United States. The audio industry was forced to go abroad to reach a price point. The reasoning was to stay in business by outsourcing the product rather than lose sales because price points could not be met. There are no longer speaker cabinet manufacturers in the United States or Canada. The last of the speaker cabinet manufacturers in Canada, Audio Products International, put their manufacturing line on “mothballs” around 2005. They are now buying their speaker cabinets out of China as a turnkey product. The problem they ran into was that the in-house manufacturing costs of the speaker cabinets were driving them out of the market and they could no longer compete.
CASE STUDY No 2: The electronics industry is not what it used to be. As a kid in the early 1960s, I remember picking up my mom from work with my dad. What I remember is all the women, in a room the size of a warehouse, welding all day. The company my mother worked for was Teledyne.
Those jobs fell by the wayside with the advent of the Wave Solder machine. The wave (flow) soldering machine is a molten solder bath. The printed circuit board is then moved along a carriage that allows the electronic components to be immersed in this bath of molten solder; being sold automatically. The resulting quality is better and the use of the Wave Solder machine is reduced in labor by at least 80%.
The automatic inserting machine was the next process efficiency that would change the face of electronics forever. An average automatic inserting machine will fill 25,000 electrical components in an eight hour shift. The difference between a factory worker filling in the printed circuit board (pcb) and the automatic insertion machine is exponential. Hundreds of thousands of jobs were replaced with the development of the automatic inserting machine.
The design and use of wave and push-in soldering machines were not intended to put more than a million soldering jobs out of work, but rather to reduce labor by creating efficiency. However, the decisions to use these machines were driven by the assumption that not using them would put them behind the competition, who would certainly be using them. The fear of not being competitive was a driving force. It was not about saving the welding positions; it was about staying competitive in their industry. Management has always focused on efficiency and getting the best return on investment for shareholders.
