Wednesday, May 04, 2011

Accenture Reverses: Offshoring Doesn't Work!

Well, THIS is interesting.

The strategy embraced over the past decade by U.S. manufacturing companies to shift production to countries with cheap labor may no longer be appropriate, according to a consulting firm that has been a big promoter of offshore outsourcing. "Companies are beginning to realize that having offshored much of their manufacturing and supply operations away from their demand locations, they hurt their ability to meet their customers' expectations across a wide spectrum of areas, such as being able to rapidly meet increasing customer desires for unique products, continuing to maintain rapid delivery/response times, as well as maintaining low inventories and competitive total costs," according to Accenture analysts John Ferreira and Mike Heilala, who head the company's North American Manufacturing practice.

No kidding, Captain Obvious......

Almost half of the companies Accenture surveyed said they are facing issues regarding poor cycle and delivery times and product quality due to offshored manufacturing and supply operations. There have also been "dramatic" increases in many of the costs that first enticed them to move their production overseas. "Those seemingly initial cost savings are no longer so big," according to Ferreira and Heilala. "They are, in fact, diminishing as transportation, commodity cost and in-country labor rates rise and exchange rates change

Folks I know have pinned it to quality and delivery, period. When up to half of the imported goods are wrong, duhhh...., cycle-times go up.

....there are many [...] costs that have not been considered when shifting production to a foreign country, such as local taxes, regulations, customs duties, VAT taxes, the agility and speed of suppliers to respond to customer demand, poor quality inspection and validation, operational risks, inventory, safety stock, broker fees, infrastructure costs, tooling and mold costs, networks needed for plant material handing, training costs, organizational communications costs, local operations staffing, capital amortization, terms and exchange rage fluctuations.

Not to mention bribery, un-authorized product design/manufacture changes, and of course, outright theft (see Fellowes.)

7 comments:

Anonymous said...
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neomom said...

Wow Dad - you need an IP zapper for the creepy stalker guy.

However, the local evil empire started seeing this stuff several years ago when investigating poor quality. Oddly enough, the logistical gymnastics, increased inventories (or stock outs) along with all the extra people to manage it made sourcing to (especially China) not really all that inexpensive.

Deekaman said...

My employer is seeing this as well in the necessity of reworking nearly every product that comes across.

In addition, I've found that items, once robust enough to handle my abuse are mere sissy-pansies of their former selves. Nearly all say Made In (Insert Third World Nation Here)

Dad29 said...

The SE Wisconsin taxpayer should know, too.

Bud Selig, (Our Hero </sarcasm) had his playpen's ironwork done in PRC.

Then it got here, got X-rayed, and had to be re-done by Rexnord's shops.

So the SE Wisconsin taxpayer got to pay for all that iron twice.

(And a local pundit or two wonders why George Petak was recalled.)

Anonymous said...

No, neomom, Dad29 ought to immediately remove the deranged anony's post lest he (Dad29) loses his soul for endorsing sin.

John Foust said...

Dad29, care to explain your comments policy? Do you have IP addresses?

Dad29 said...

I allow YOU to comment, Foust.

That should tell you something.