Skip to comments.Amazon/Kindle Part 7 The End Of The Road For Outsourcing? (Dismantling America's innovation machine)
Posted on 09/10/2011 7:25:47 AM PDT by OldCountryBoy
...Im late on the comments because I am helping a major US corporation once again ship a perfectly running, extremely profitable manufacturing operation overseas. By all means of evaluation, it makes no sense to ship it away. This operation meets all cost targets, highest yield requirements and etc.
It is moving because someone has a burr that says we can make it cheaper overseas.
Just wait until yields drop, requiring throughput to increase, and increased part costs due to the additional wasted parts that will be bought...
(Excerpt) Read more at forbes.com ...
Not to mention that, if the country they outsource to just simply steals their product, they’re out of business entirely.
either government over regulation and over taxation
kill american jobs.
The thinking is to get profits up the next few quarters, pocket their stock options, and move on before the theft of trade secrets becomes obvious.
This is what I never understand about the people who tout the Bush tax cuts as a big economic stimulator. Unless my memory fails me big corporations used those cuts to pay to move their manufacturing base overseas. Anyone remember “transitioning to a service economy”? For some reason we don’t hear that phrase anymore.
As for the prosperity I would venture to guess Barney Frank had more to do with it than George Bush. Barney’s loosening of credit had homeowners across the land using their equity as a piggy bank and we saw where that ended up leading us. Our prosperity was built on credit cards, not tax cuts, and in the long run it’s been a disaster.
I’m not against tax cuts. I just don’t see how they helped or how the GOP can reasonably expect businesses to suddenly start manufacturing here again if they cut them more or make the present ones permanent. I see them just moving more away.
A major problem with outsourcing to China is that you provide the product designs, assembly instructions, tooling requirements to them to build your product. They build it for a while and often hand off the whole production package to someone else to make for a lower price, since they aren’t paying you the royalties or profits, to the same customer list and distributors to whom they sold it previously on your behalf.
You get cheap production for a little while, and then you get a competitor who already has a business relationship with your customers.
Taxes can be understood
The Economic Disaster we are going through requires
Going ALL IN on Efficiency of entrepreneurial efforts
Regulation profoundly stifles Efficiency
And Unions, in so far as they hogtie Productivity,
Are just as bad, and can be Worse
Low Economic Multiplier Employment should be discouraged
This includes the majority of Government Employment
Or you get...
Lenin welcomed the corporate "useful idiots." He badly needed them to build the economy lest there be another revolution-- against him this time. When things were going well be planned to ask the "useful idiots", "Got any rope for sale?"
But Lenin died and when Stalin took over he rid the U.S.S.R. of the scary free market which had quickly grown to about half of the total economy. It scared the hell out of the commie ideologues.
Red China ain't that stupid. Deng studied NEP. Their commie ideologues and families are most of the billionaires.
.. but nevertheless the NEP end game is to take everything the useful idiots have and kick 'em out.
That will happen if for no other reason than there are 800 million or so very, very, very poor and very, very, very restless Chinese who need the money -- more than the useful idiots need money -- else the Chi-coms face revolution. That scares the hell out of billionaire Chi-com commie ideologues.
And lots of luck to American corporations getting Congress to give them TARP money to compensate -- there will be revolution here if they try it.
No cheers, unfortunately.
When everything is made in China everything is copied by the Chinese.
The problem is, the U.S. government is becoming the same way, and often not even for the money. The EPA alone can run roughshod over a companies hopes and dreams, to say nothing of random, 'helpful' bureaucrats and politicians.
Bottom line, it's easier from a long term planning prospect to negotiate with, bribe, or threaten a fellow corporation in Communist China than it is to do so against the most powerful government in the world.
I wouldn't know what to expect, trying to deal with the U.S., other than they'd be happy to drive me bankrupt if they decide I'm not 'too big to fail' or otherwise part of their team. I'd know exactly what to expect in China, and how to deal with it. Because they *want* to do business, they just want to get the better end of the deal.
I consulted at a Chicago-area firm which decided to outsource 600+ jobs to China. The study was performed some two years earlier, led by the CFO, and was shelved due to an unwillingness to take the risk. This attitude shifted when profits became more elusive (it is in the tech industry, which is known for its business cycles).
They shifted production and laid off almost all manufacturing staff. In the first six months, costs were roughly what were expected. However, new contracts were required with suppliers and such and by the seventh month, costs were already up 40% over what was expected. This only continued as resources and labor became more elusive.
My last understanding as I left my time with them was that they had regret over what they had done, as the benefits were not realized as expected. Now, to their credit, Illinois is union-crazy, so they were getting away from that beast, so kudos for that.
I wouldn’t outsource to China because I couldn’t trust that I had control of my intellectual property or even my equipment, once there. If I can’t touch it without flying half a world away and that is expected to be my primary facility, I wouldn’t do it.
I’d set up shop in Texas, Arizona, or Oklahoma, instead.
JUST ASKED THE MODS TO REMOVE MY LAST POST.
I have seen my own designs come from the other side of the earth, with someone else’s name on them. Saw this as early as 1989. We dismantled counterfeit devices, in detective mode. It was clear the counterfeiters had not reversed our design. They were handed our design.
I believe high level management’s private motivations/greed was at play in some of these shady technology transfers.
Because the financiers, shareholders and accounants live from quarter to quarter. Profits at all costs is the name of the game. They run the corporations; not the workers, the engineers, the executives, or the consumers. They could care less where or who makes the product, as long as the product sells and makes them money with the largest margin possible. If in the world some country legalized slavery again, every corporation on the planet would beat a path to their doorstep. The closest thing they have to that is china, which is why they choose to do business there. Don’t believe me? Float the rumor that the PRC is putting a minimum wage law into effect, and watch them jump like rats off of sinking ship.
To WilliamofCarmichael: This is on my required reading list. Is it too late?
To Steel Wolf, ConservativeMind, Hillarys Gate Cult: Your stories are ringing in my ears! I’m sure we could talk for hours, and I would become even more depressed.
Back to weekend work. An old roadster pickup is calling for attention. It is from a better time... Later.