Top 10 signs your labor costs are too low
September 8th, 2010
Your purchasing manager was just fired due to skyrocketing shipping costs now that you build product in a country with low cost labor.
You must hold a national press conference to explain how lead paint was put on your product by your supplier in a country with low cost labor.
You get up at 3:00 a.m. (for the fourth night in a row) to talk about a quality problem with a factory in a country with low cost labor.
You must cancel your lean projects because all your black belts are still solving quality problems in a country with low cost labor.
Though you have many half empty factories in your home country, you have a plan to build a new one in country with low cost labor.
Your best manufacturing leader just quit (via text message) because she wants to live with her family and not in a country with low cost labor.
Your purchasing manager’s brand new replacement was just fired because inventory carrying costs are through the roof now that you build product in a country with low cost labor.
You must find a landfill to bury three months of bad product now on a slow boat from a country with low cost labor.
Your new product launch is delayed because you have to tear down the machines and move them to a country with low cost labor.
The financial types that run your company are too far removed from the work so their only trick is to move it to a country with low cost labor.
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Mike Shipulski
Mike!
Don’t tell me that the perception of a simple ‘cultural barrier’, may turn out to be something of devastating importance in engineering, manufacturing, and commerce! Culture-schmulture! Who needs liberal arts & sciences anyway……!
you can add these
Your accounting manager made the “cross border transport fee” check out to the wrong cartel this week. You now have to go in person in some near border desolate area to give it to them in cash. This will “insure” both parties products make it across the border in your truck from this low cost labor country.
You get a call first thing Monday morning from corporate attorneys. They need to meet with you along with some DEA agents in Dallas to discuss the above mentioned shipment from your low cost labor country. They also instruct you to bring an overnight bag and to not worry about lodging accommodations.
The electric bill from your low cost labor country operation will require a new line of credit loan with your finance company.
You need to fill that 8 page credit application out again from your computer in that low cost labor country because the power blinked again and all your updates to your open files are history….again
Also the same cartel mentioned above would work on your power blinking “problem” if you are able to generate a separate cash payment to them monthly. This will keep your low cost labor plant’s lights on “more consistently”
You have to shut down your water cooled machines midday, everyday in your low cost labor country because there is not enough cooling capacity to remove the damage causing excess heat on the machines used to make your products. However the operators are able to heat their tortillas and tamales very quickly before breaking for lunch.
low cost labor countries are used for one reason and one reason only. to keep American labor petrified they could lose their jobs at anytime. the low cost labor country is a joke and farce.
you can add these
Your accounting manager made the “cross border transport fee” check out to the wrong cartel this week. You now have to go in person in some near border desolate area to give it to them in cash. This will “insure” both parties products make it across the border in your truck from this low cost labor country.
You get a call first thing monday morning from corporate attorneys. They need to meet with you along with some DEA agents in Dallas to discuss the above mentioned shipment from your low cost labor country. They also instruct you to bring an overnight bag and to not worry about lodging accomodations.
The electric bill from your low cost labor country operation will requie a new line of credit loan with your finance company.
You need to fill that 8 page credit application out again from your computer in that low cost labor country because the power blinked again and all your updates to your open files are history….again
Also the same cartel mentioned above would work on your power blinking “problem” if you are able to generate a seperate cash payment to them monthly. This will keep your low cost labor plant’s lights on “more consistently”
You have to shut down your water cooled machines miday, everyday in your low cost labor country because there is not enough cooling capacity to remove the damage causing excess heat on the machines used to make your products. However the operators are able to heat their tortillias and tamales very quicky before breaking for lunch.
I forgot one. You now have to hire a new accounting manager in you low cost labor country. Since the cross border transport fee was paid to the wrong cartel you have not seen or heard from said accountant.
low cost labor countries are used for one reason and one reason only. to keep american labor petrified they could lose their jobs at anytime. the low cost labor country is a joke and farce.
Amen, brother! For all the advanced business degrees, certifications, etc. that our C-Level executives hold these days, why is labor cost the ONLY thing that seems to be addressed in trying to make a company more profitable. I’ve seen this too often; work is outsourced to the low-cost country without regard to the related costs in shipping and inventory that are increased in order to make the move work. The company looses any ability to be agile because of the necessary lead times, not to mention the increased problems encountered in trying to design a product and its manufacture across oceans. As the old saying goes, be careful what you wish for, you may get it — lower cost of labor, but higher total cost and loosing market to your competitors because of your loss of agility to respond in a timely manner.
Matt, thanks for writing these down. No one would believe me if I did. Just plain crazy. Mike
Great Discussion – Bob nailed it. Let’s teach the decision makers how to accurately evaluate the “total cost” instead of only comparing the piece/part price. All the associated expenses come out of someone elses “bucket” so let’s not worry about that. With the current accounting methods no one will be able to put all the data together to realize the total cost to the “company” is greater to send the part off shore.
Great subject matter, Mike. I am continually dissuading discussion at my company regarding the use of LCR labor. We are utilizing Asia, India and Mexico and for the life of me I am not able to see the economic sense (other than we are already invested).
So it now costs $0.27 of LCR labor for a product instead of $0.72 in local labor to put the same thing together. What is the cost of logistics? What is the cost of poor quality (like we have become hammered with lately)?
To me, the biggest…no…the gargantuan issue ANY company deals with is control. The minute you outsource ANY aspect of your manufacturing…be it assembly or specialized process…you relinquish control over those parts. You hand the control off to someone else. You’ve trusted someone with the keys to your business. Send it outside, and no matter how much you think you have control, you have effectively given it up. Okay so let’s outsource to an OFFSHORE supplier. Now you’ve elevated that issue to a newer, higher level. To save $0.45 of labor???!!!
Before I get too emotional, I’ll close by saying that if you stand back and look at the big picture, LCR labor is a dumb-ass thing to base a decision on to hand control of your business over to someone who likely cares more about their own before they will care about the state of yours.
Ok, sorry for dragging this out – but I need to add one more.
You’re off-shore contractor doesn’t really mind fabricating your 100-piece prototype order 3 times (without a PO revision) so they can deliver something you can cram through QA.