Bring It Back

Companies (and countries) are slowly learning that moving manufacturing to low cost countries is a big mistake, a mistake of economy-busting proportion. (More costly than any war.) With labor costs at 10% of product cost, saving 20% on labor yields a staggering 2% cost savings. 2%. Say that out loud. 2%. Are you kidding me? 2%? Really? Moving machines all over the planet for 2%? What about cost increases from longer supply chains, poor quality, and loss of control? Move manufacturing to a country with low cost labor? Are you kidding me? Who came up with that idea? Certainly not a knowledgeable manufacturing person. Don’t chase low cost labor, design it out.

(I feel silly writing this. This is so basic.  Blocking-and-tackling. Design 101. But we’ve lost our way, so I will write.)

Use Design for Assembly (DFA) and Design for Manufacturing (DFM) to design out 25-50% of the labor time and make product where you have control. The end. Do it. Do it now. But do it for the right reasons – throughput, and quality.  (And there’s that little thing about radical material cost reduction which yield cost savings of 20+%, but that’s for another time).

The real benefit of labor reduction is not dollars, it’s time. Less time, more throughput. Half the labor time, double the throughput. One factory performs like two. Bring it back. Fill your factories. Repeat the mantra and you’ll bring it back:

Half the labor and one factory performs like two.

QC stands for Quality Control. No control, no quality. Ever try to control things from 10 time zones in the past? It does not work. It has not worked. Bring it back. Bring back your manufacturing to improve quality. Your brand will thank you. Put the C back in QC – bring it back.

Forward this to your highest level Design Leaders. Tell them they can turn things around; tell them they’re the only ones who can pull it off; tell them we need; tell them we’re counting on them; tell them we’ll help; tell them to bring it back.

4 Responses to “Bring It Back”

  • Sigh…yes. We talk about keeping our manufactured ideas on-shore. Build ’em here at home. Keeping it in the family. So many undesirable results can happen when we move or ideas overseas for the purpose of taking advantage of low-cost regional labor. But putting it to numbers (like you did) makes you wonder where the romance is.

    I do believe, however, there are some strategically good reasons for locating manufacturing operations overseas. Mainly that would be to build it next door to your customer…if the majority of your market is located there.

    But in reality, it doesn’t take a lot of effort in most cases to design your products in a way that they are easier to put together and the cost of labor becomes a lot less significant. DFMA projects are a great place to start.

  • Chris:

    As a trial, we experimented with an off-shore (China) prototype run of 20 circuit boards promising high quality, and that each board would be electrically tested. We normally would source this type of thing from a US based supplier. Typically this kind of thing would cost a 300-400 dollars in the US. The Chinese source was <$50 (plus shipping but that was surprisingly under $10) Simple, 2 layer boards really, and unpopulated. The result, the Chinese supplier (who is hidden behind a reasonably good looking web page) shipped us twice as many boards as ordered (!) but that half of the total were poor quality due to significant misalignment of the solder mask. 50% rejects. Also shows us that electrical testing is no substitute for good overall QC. Also, the low shipping cost is some indication of a form of government subsidy to get their goods to us without a cost penalty. Conclusion – we will continue to work with US based suppliers.

  • Bill:

    Knowledge is king. Let’s teach the people making the “off-shore decisions” how to evaluate the Total Cost. Too many of these decisions are based on the individual piece/part cost and not the total cost to the business over the life of the product. Armed with this knowledge many “make it there” or “make it here” decisions would have a different result. In some cases it may be better for off-shore manufacturing….but in many cases that are currently produced off-shore – the company is loosing money when considering the TOTAL COST. Let’s make wise decisions and build this country back into a manufacturing powerhouse it should be.

  • Mike:

    Bill – total cost will set us free. However, we distract ourselves with things easily measured – labor cost. The costs that don’t hit the BOMs are often ignored or, worse, discounted because they hit someone else’s budget – quality problems, shipping costs, added inventory. Costs not on the BOM are considered second-class costs and mistakenly carry less weight. Maybe we should burden the BOMs with all the costs.

    Thanks for contributing to the discussion.


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