@MeasurementBlues You're right that folks get all worked up contemplating off-shoring manufacturing, with visions of dollars signs dancing in their heads.
But the promise often falls short in practice.
Successully managing a multi-continent inter-related organization is not a simple task. Moving to lower cost labor markets carries with it some substantial risk. Some of these markets suffer from institutionalized graft and forgery of basic materials documents. At the very least, the environment requires heightened security and quality control.
But as technology marches forward, the cost of labor becomes a decreasing portion of manufacturing costs. The real advantage that some off-shore facties enjoy comes from lower capital costs and strategic government credits or forgiveness of taxes. In a study that I did a dozen years ago, the major difference in off-shore manufacturing vs US-based factories boiled down to cost of capital. Raw materials costs were essentially the same regardless of location.
Historic decisions to move some capabilities to low wage countries (like semiconductor packaging) led to a dominance by off-shore companies. These previously "low margin" activities have become startegic over time. Thus, US semiconductor companies "gave" this piece of technology away.
Decisions made to off-shore regardless of your country of origin are deceptively strategic. Business executives must take a longer view of their industry and their technology.
But once a product is shipping, the move to offshore manufacturing is enticing to those who only understand the quarterly numbers.
"In my experience off-shoring is seldom the answer to cost containment. In most circumsytances, shortening the development cycle yields much better results than simply controlling costs by using the lowest cost supplier."
@MeasurementBlues Wow! As late as employee #10? I've heard the same class of comments for may years as well. At different points in time it was Taiwan, China, Malysia, Philipines, Mexico, and others.
In my experience off-shoring is seldom the answer to cost containment. In most circumsytances, shortening the development cycle yields much better results than simply controlling costs by using the lowest cost supplier.
Consider a development that is spending $150k per month. A decision to avoid a PCB layout verification cost of about $20k cost 3-5 months of added debug AND a board re-spin. That $20k cost savings cost more than $500k. Then, there is the opportunity cost of being late to market.
"Sin in haste, and repent in leisure." And pay for it too.
At the end, I agree that is essential that engineers understand that motivation for execs. A few execs are straight up about their objectives.. Unfortunately too many executives went to B-school without a strong engineering foundation and now have a toolbox filled with easily misused tools.
"When the only tool you have is a hammer, you tend to view every problem as a nail"
And so it seems to be the case with too many management decisions.
One key enabler of technoloy progree is the close connection between research and manufacturing/production. Invaluable knowledge and training is gained by debugging production issues and refining technology developed in R&D. Once manufacturing is gone, the training ground is gone, along with all the tribal knowledge transfer and cross pollination between the researchers and the shop floor engineers/techs. As some of the other commentators have said, the long term impact of outsourcing and offshoring has yet to hit.
It's easy to blame the "bean counters" for bad decisions
Sorry, Henry, that was not at all my intention. My point was, instead, that the bean counters have different motivations from engineers that work at the company. We march to the beat of two different drummers.
Even if the top execs habitually sugar-coat their motivations with words to soothe the employees, flowery mission statements and the like, it pays for engineers to know the truth.
Outsourcing is but one manifestation of these different motivations. Ultimately, history may be able to decide, in some cases, which decisions were "bad."
I like the graph. Nice to see some numbers attached to the argument. It matches my personal experience.
The thing that gets missed is the long term effect of outsourcing. Maintenance, updates and other activities sound like good outsourcing candidates. Keep the hard, high value, exciting design work onshore and close to headquarters. My experience is that this fails given some time. The grunt work is a good place to train new people. It also lets the designers and engineers know what should be fixed. Without doing the grunt work, you don't have the tools to actually make a better finished product.
We should also remember that headquarters may not be in the US. The outsourcing can come from and go to anyplace in a flat world.
I would also like to see the differnces in offshoring work, versus letting people work remotely. There are similar problems, of distance, communication, and time zones, but remote work still "works", at least according to some people.
@MeasurementBlues Ironically, the decisions to "on shore" jobs has been made for financial reasons. The cost of poor quality outweighs the original fincnial reason to off shore. But the full impact of the decisions 309-30 years ago to off shore has yet to be felt I'm afraid.
As we unveil EE Times’ 2015 Silicon 60 list, journalist & Silicon 60 researcher Peter Clarke hosts a conversation on startups in the electronics industry. Panelists Dan Armbrust (investment firm Silicon Catalyst), Andrew Kau (venture capital firm Walden International), and Stan Boland (successful serial entrepreneur, former CEO of Neul, Icera) join in the live debate.