Offshoring

November 19th, 2012

For many years companies have been offshoring some of their work.  This can be beneficial in many ways.  It can reduce costs but one must be careful that it does not just reduce costs short term and put you out of business in the long run.  I can speak more for the electronics industry.  There has been a propensity to offshore and to outsource labor.  Company executives are well aware of the benefits as they are given figures to say ship manufacturing to China (the later being of less interest today because of some of the issues herein).  Let’s take a look at an electronics design that goes overseas.  It gets to the company that you have a relationship with.  The end company takes the design and does the work for you but also takes all of the information and design and does something else with it.  Usually it gets sold to another company who reverse engineers it quickly and figures out the circuit so they can implement in a competing company.  Larger companies in the US realize this but have sufficient cutting edge R&D work to replace the technology which they lose overseas.  But if you are a smaller company even sending your PCB designs overseas can be terrible for your company in the long run.  Even using temporary visas like the H1B/L1 or regular employees with connections overseas can be detrimental.  Take a look at the Hanjuan Jin case of industrial spying.  If one thinks that it is an isolated case and specific to only China, one is quite naive.  As an executive with a long range vision hopefully your staff advises you well for long term direction of the company.  As shareholders, hopefully the executives of the company is working for long term returns.  Some have just looked at short term gains in the past and did not care if the company succeeded or not.  That era is coming to a close as we realize that is not sustainable.  It is nice to have a Global Economy and other markets are somewhat attractive now.  We have made it that way as a superpower.  Just remember, glory fades (origin of the word fad).

Ronald KollmanHaynes-Bent, Inc.sales@haynesbent.com – (630)845-3316

Radiofrequency hardware design, EMC/EMI analysis and 3D Electromagnetic simulation.  We also provide Technology advise for investors and executives.

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About haynesbent

Radio Frequency (RF) Hardware Design, EMC/EMI (esp Aerospace) and 3D Electromagnetic Simulation consulting/contracting services. General all around scientist.
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6 Responses to Offshoring

  1. Look into Re-Shoring http://www.reshorenow.org/ .
    People have figured out that the TCO (total cost of ownership) is actually larger than just direct material & labor costs, DUH ! Many cases of doing a product in a distant low cost region have failed for factual real economic reasons. Check it out. There are many success stories of bring the product back to the US resulting in better quality , cycle time , optimal use of scarce (human) resources in the initiating company and still a fair profit … jerry at jdm labs

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