Also, it’s FREE COMIC BOOK DAY. So stop by your local comic shop, get your free comic books, and while you’re there, pick up a copy of: Groo: The Hogs of Horder and maybe you’ll finally understand how the relentless blind pursuit of low cost country outsourcing always backfires in the end!
The Manufacturing Innovation Blog recently published a great post on why you should be HomeShoring. And while they are choosing to use the less precise term of re-shoring, they are making the same point that SI has been trying to make for six years – for many of you, it’s probably time to bring manufacturing home (or at least back to North America as a starting point).
Asia is not the low-cast locale that it used to be. When you factor in:
the reality is that, when you do the Total Cost of Ownership equation, and also factor in the productivity you can get in a modern manufacturing plant with lean processes and a well educated workforce, it’s often cheaper to produce the product at home in America! Unless you’re talking Fortune 100 economies like scale, and are ordering millions of units like Apple does, you’re not getting Foxconn economies of scale and the 10% to 20% savings that lured you over there a decade ago just aren’t there anymore.
It’s time for North America to rebuild and strengthen its manufacturing role as the world’s manufacturing leader. The industrial revolution and the manufacturing era that followed is what allowed America to overtake Britain as the number one country in the world (in terms of GDP). I truly believe that if America does not immediately embark down the manufacturing path again, China will overtake America by the end of the decade. While it might be inevitable that someday China will overtake the United States of America as the number one producer of GDP with four times the population size and a mission to reclaim their former glory, there’s no reason that such a rise to prominence can’t be delayed for a couple of decades. But that will only happen if America focuses on what made it great, not pointless political agendas and filibustering in the Senate.
And by that I mean Mexico! I was thrilled to see this recent opinion piece in the New York times on The Tijuana Connection, a Template for Growth that said, for many (North) American manufacturers that need to beat Chinese Rivals that Mexico is the New China because it shows that a new generation of entrepreneurs are discovering what a few old greybeards have known all along — Mexico is cheap, efficient, and full of potential (like the 115,000 engineering students it graduates each year, which, per capita, is triple the U.S. graduate count).
Plus, it has little known secrets like Tijuana which, in addition to its reputation of party central is also electronics central — with a growing number of North American, European and Asian (including Sony and Samsung) companies opening and running factories that assemble consumer goods (such as TVs and Computers), medical devices, and even aerospace assemblies. And its prime location, just across the border from San Diego, means that an American company with an engineering office in San Diego can quickly and easily supervise production in the Mexican factory as needed, as it’s a quick drive across the border (for business people in the fast-track lane). (Plus, as the article notes, there is Juárez where Foxconn has a factory; Querétaro, which builds GM engines; and Boeing factories.)
But the sad thing is that the beardless don’t remember that this is not a new Mexico — this is the old Mexico finally being recognized for the value it has always provided. There’s a reason the outsourced manufacturing craze started with Mexico and will return to Mexico — labour costs are relatively cheap, capability is high, logistics and (remote) management costs are extremely affordable and manageable, English is relatively common (and fluency is at least 7 times that of China), and culture is a close fit.
Si quieres dinero y fama, que no te agarre el sol en la cama.
You could start with these pointers from Inbound Logistics on Reducing Ocean Freight Costs:
Or, you could just eliminate the need for (a significant quantity of) ocean freight (entirely). Let’s face it — 100% savings is WAY more than the 5% to 10% the above will shave off your costs.
How do you do this? Nearsource (or, better yet, Home-source)! In North America, consider Mexico or Brazil. With overseas labour costs and logistics costs climbing significantly year-over-year, for some products, it’s just as economical to produce them south of the equator — especially when you consider overseas labour rates and logistics costs are NOT going down. Now, SI knows this isn’t necessarily possible for all categories (as high-tech requires very advanced production facilities which can’t be thrown up or staffed overnight, for example), but with the exception of high-tech, biotech, and other industries that require a large pool of very specifically educated people and very high-tech production facilities, there’s no good reason NOT to be looking at locales like Mexico and Brazil right now. (And even if the raw materials need to come from overseas, the cost of shipping (refined) raw materials, which are very dense, is much less than shipping final goods, which typically aren’t dense and which require a fair amount of packaging — and which often have lower import duties!)