Outsource Production (and other mission critical functions) to China or Mexico and Lose ???
This entry was posted on April 14, 2008 and is filed under China Outsourcing.
In the seventies and eighties American-owned Canadian manufacturers used to complain because their US parent seldom allowed them to sell their output outside of Canada. There was good reason for this policy: The parent wanted to keep the world product mandate in the United States to prevent the Canadian subsidiary from competing offshore thus maintaining control over their markets.
Seems thing have changed since today we see all kinds of outsourcing. We hear a lot about US production outsourcing to China and Mexico. Then there is Customer Service Center outsourcing to India and, unbelievably, outsourcing of marketing & sales. There are strategic dangers to any kind of outsourcing if it is not carefully managed and controlled.
Take for instance uncontrolled outsourcing of production to Chinese contractors. Sounds like a sensible thing to cut costs but without control - and control is difficult in China - the American parent could start losing its customers as these fall to the Chinese contractor themselves (or the Chinese companies often in association with the contractor). Not only does the American company pay the China contractor to learn all about how to make a proprietary product but so also does the American company lose its own ability to take back that manufacturing expertise**. The answer here is not to outsource completely but rather set up your own manufacturing in China: It is difficult but once you learn the ropes it is greatly to your advantage. For more information on TRU services in China see http://trugroup.com/TRU-China-consultant.html
Similarly for Mexico. For American companies it makes little sense to outsource to the Maquiladoras under the so called "Shelter Program" when it is easier and more strategically sensible to set up your own manufacturing in Mexico. (And indeed this is a current trend). For more information on TRU services in Mexico see http://trugroup.com/mexico.html
There has been a strong trend in the last five years to outsource marketing & sales. To this observer this can be suicidal to your company. Your customers are by far your most valuable asset and to give outsiders access to them is simply foolish. This subject was covered in a recent panel discussion I participated in and you can read the notes prepared for this discussion at http://trugroup.com/TRU-distribution-strategy.html
++++++++++++++++++++++++++++++++++++++++++++ ** Losing manufacturing expertise can land a company in trouble -
Mattel Has Loss on China Costs, By Mark Clothier and Oliver Staley
April 21, 2008 (Bloomberg) -- Mattel Inc., the world's largest toymaker, posted its first quarterly loss in almost three years on higher manufacturing costs in China, while . . .
August 13, 2009
Gilbert general contractors wrote:
In my opinion outsourcing is on high demand for general contractors, this is pure economics law, you reduce the costs and have the same output. There already are a lot of industry fields that focus on outsourcing, I can't really predict where would that lead us. Reply to this
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