Saturday, March 15, 2008

Made in the USA: Translation Insurance Policy

Today companies are shipping whole manufacturing operations off to foreign countries. It does matter where really as long as they find the lowest cost center available. Then you have to ask yourself is this really in their best interest? The truth is that it is a good idea but that is not the whole truth.

There are a plethora of reasons to keep some manufacturing at home. I identify this concept as "Manufacturer's Insurance", and keep in mind that this insurance doesn't apply to the United States alone. This applies to corporations in countries such as France, Germany and Japan.

When businesses outsource complete product lines and sometimes their complete manufacturing facilities they lose several things. The two that matter most our control and knowledge.

The political process of other countries is often unpredictable. You never know what they will do and how that will affect business. The host country advantage is that at least your government should have the businesses benefits in mind. Currently, China is rapidly becoming a manufacturing giant. I would argue that with the capitalist drive of their economy and the communist control of their government si bound to clash. It is inevitable and guess who has the guns. Who is to say that companies shouldn't get while the getting is good though.

Every manufacturer knows that production can be haulted for many reasons even at home. The advantage is that when these occur at home upper level management can immediately implement solutions. When they occur overseas it could be months before upper level management can address the problem. The home turf advantage is pivatal to some extent in every business.

The other issue is that knowledge is lost and this is why I maintain that the most complicated processes should be kept at home. This way your company has people that understand the most integral lines, and can train backwards to get up to speed if manufacturing is lost in other countries.

The idea behind my thoughts is that keeping some manufacturing at home allows companies to quickly fall back and bring home lines. There are also the patriotic reasons. It has been proven that our job market and economy can adapt to blows time an time again. The home economy does however purchase many of the products that have been outsourced and this is not a perpetual blow the economy can take at some point it will break.

It has also been shown that when America's economy suffers so does the world economy. America and Europe aer the pins between failing globally and succeeding globally. For this reason it is important that the host economies be evaluated before shipping jobs off. I guarantee that a company can produce a million parts for one-tenth the price and still lose money if no one at home can buy the good.