Chase Perfection, Not Lower
Wages.
posted 22-09-2006 16:23
Outsourcing is nothing new. The succession of attractive
offshore sites has run the gamut from Ireland, to Mexico,
Korea, Thailand, Japan, and now China. The reasoning has
always been lower wages. The current infatuation with China
is driven by both low wages and a relaxation of taxes on
participants in China. If memory serves, similar incentives
were provided in previous objects of affection.
It is interesting, and instructive, to note that while
the courtship period lasts varying amounts of time, it always
ends with the need to find a new, even lower-cost opportunity
just over the next hill. It is difficult to understand why
we don’t realize that once formerly underpaid workers
see competition for their services increase, they quickly
figure out how supply and demand works. This newfound wealth
that results from their discovery just as quickly is spent
on some of the luxury items they are producing for the rest
of the world. First it’s clothing, then appliances,
then television, and finally cars and homes. It is a totally
predictable progression and one that is being played out
in all of those countries that caught the fancy of the cost-cutters
in the United States and elsewhere. It is only a matter
of time before Chinese citizens will want to participate
in the global consumer economy and then the game is over.
Even more disturbing is that when this happens, there will
be a lot of brick-and-mortar or contractual obligations
left over to deal with.
The frustrating thing is that there are ample examples
of companies that have successfully overcome their paralysis
and dealt with their processes, people, and markets. Toyota
Motor Manufacturing, probably the most successful car company
in the world by any measure, has come to the United States,
built a plant, hired American workers, trained them, and
in-sync with its sister plant in Ontario now produces automobiles
at the lowest cost in the world – yes, including some
home factories in Toyota City. It is also instructive to
note that Toyota does not outsource. A spokesman for Toyota
was recently quoted as saying that the pride in the plant
will not allow anyone else to do it better. Why send orders
to companies that are not as Lean as Toyota and expect them
to provide better service, higher quality, and lower cost?
It is not even discussed.
There are plenty of companies here in the United States
that have fought and won the same battles. Jacobs Manufacturing
(diesel engine brakes) was on the ropes in 1990 as Japanese
imports threatened their very existence. Today a Lean “Jake
Brake” is serving Japanese customers with plants in
Asia.
The Wiremold Company doubled its market share, reduced
inventories by 75%, doubled margins, and tripled revenues
using Lean techniques in all aspects of their business.
Most notable about this turn-around was that Wiremold adopted
Lean principals across the entire organization, including
Accounting, Sales, Engineering, and Customer Service as
well as Manufacturing. When the company was recently sold
to a large European organization, all employees received
substantial payments reflecting the value of their contribution
to the process.
Pella Windows has overpowered its market using Lean principles
to develop lightning speed customization for clients. Cellularization
of manufacturing processes and continuous improvement across
the entire organization have placed it in a virtually unassailable
leadership position.
The answer to this exodus of earning opportunities for American
workers is not taking jobs away, but rather finding ways
to innovate around the cost problems we face. That is our
expertise. We take the Toyota Production System, Americanize
it, and beat them at their own game (a real reversal of
fortunes). We use our proximity to our markets to outwit,
out-design, and outplay our competition.
I agree with some that we may be standing on the threshold
of a disturbing “race to the bottom.” That we
have come to this problem is not the fault of anyone, it
is the fault of everyone. Escaping it is the opportunity
we all can participate in.
Linford E. Stiles
President
Stiles Associates, LLC
Stiles Weblog 