A recent issue of Blane Canada’s Economic Development Marketing Letter had this analysis from Eric Davis, Owensboro, KY. How to evaluate the longevity of a local manufacturer? Look at the following criteria.
1. Low skill requirements
2. Higher than average wages
3. International competition
4. Union activity
5. Lack of investment and/or technological change in the industry
Davis argues that “if you identify 3 of the 5, that’s an indicator that they are packing their bags. Four out of five means they are as good as gone.”
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A recent study shows that offshoring to China requires a 24% add-on to account for logistics, quality, cash flow, etc. Since it usually takes a 30% spread to make the move to offshore, good design for manufacturing and assembly (DFMA), plus good process engineering can be used to keep the jobs here, despite China's exchange rate manipulation and low wages. We are not keeping our eye on the right ball.
Dave: You are completely correct. I have a very interesting study that shows the cost advantages of the USA compared to various locations for both mfg. and call centers. Some parts of the USA have some huge advantages in the manufacturing area because of the logistics issue and also our higher productitivty of our workforce. We don't fare so well when compared on the call centers.
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