Offshoring, outsourcing, inshoring, reshoring, Where are we really headed? 13

[ManifestDestiny]

Hi folks

Offshoring (and the ensuing layoffs) has really gathered pace since the GFC. You've heard, you've seen, you know. In australia at least, offshoring seems to have really ramped up in the past few years. I understand the business case, it doesn't make sense to pay a local worker $100/hr when someone from a developing economy can do it for $4 and a bag of rice.

The question is, how far can it go? Will we reach a point where any job that doesn't actually require a physical presence can just be done remotely? From what im seeing in the US, the offshoring craze seems to be stalling, businesses are finding out that work is not to standard and some are bringing back their engineering (re-shoring). Some say its ok because offshored work to certain countries is never good quality. I think this is farcical in the long term, because eventually the quality will come in to line with that of any western country because business will demand it. They're not opening up multi million dollar "technical centres" for nothing.

Im curious how engineers now and into the near future can adapt to such a change in the jobs market, and what does one do to stay attractive to an employer.

Regards
Sam
Brisbane, Australia

Young Engineer. American old west enthusiast

 

[zdas04]

Greg,
You missed the basic law of human interaction--The definition of "easy" is "someone else has to do it".

David Simpson, PE
MuleShoe Engineering

"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
The plural of anecdote is not "data"

 

[cranky108]

It reminds me of the same issue with lawn mowers. Why in the world do I need two speed controllers, and a clutch? Speed of blade, and speed of travel, and a clutch in case I let go of the handle.

I agree that we maybe asking for too much under the hood of a car, however, I am not asking for all those things, they are being mandated. So don't you feel safer in a car with half the size, and about the same gas millage as my 25 year old pickup? Of corse what I don't have is power brakes, power stearing, and automatic transmission (and maybe some smog stuff).

Some how we have taken the add on route to cars because like the $6 million man, we can make it better. But the question is:is it better? Does it go faster (no), is it cheeper, or cheeper to operate? Can we build them faster?

And why do cars need to be reengineered every year? Why can't the only changes be seat covers?

 

[MikeHalloran]

Production numbers used to be high enough that the body dies wore out in a year, so it cost little extra to replace them with something a little different.

The other justification for re-doing things every year or two is that you need to keep your engineers busy to keep them from starting up a competitive outfit on the side, and to keep their skills current.

Or, lay them off when you don't need them, and suffer the learning curves of recruiting and starting up with a new crew on every new project.




Mike Halloran
Pembroke Pines, FL, USA

 

[GregLocock]

You may or may not have noticed but making and selling cars is not an especially profitable exercise, the margin to the manufacturer is often quoted as falling in the range -2 to +10%, which I think would cause Mr Dell or Mr Gates to have a heart attack. RoC is laughable, I don't buy auto shares for much the same reason I don't buy airlines.

The reason is competition. There's nothing wrong with a 25 year old truck if it suits you, but for a manufacturer to sell large numbers of cars (or trucks) at a reasonable profit means making them attractive to buyers. You can buy a 25 year old truck brand new, a Toyota series 70. Be prepared for sticker shock. Then drive it against a truck launched in the last 5 years. Sure if you are a large mining company and your maintenance infrastructure is based on series 70 trucks then you might buy some more, but newsflash, those days are going.

Meanwhile, that Fiesta sells for about 33% of the median wage in Australia. The Escort when new cost pounds 4000 in the UK in 1980. Median wage was pounds 6000. So in real terms my new car is half the price of the 1980 one. It uses 30% less fuel. It is rather smaller inside, but more comfortable. It uses 30% less fuel. I don't know how the emissions compare. It is twice as powerful. It is on tires that are 50% wider.

Cheers

Greg Locock


New here? Try reading these, they might help FAQ731-376

http://eng-tips.com/market.cfm?

 

[SomptingGuy]

What keeps engineers busy (in the auto industry) are the legislation changes regularly made by those who don't really understand how hard they are making things to meet them. But I suppose it feeds the tier 1's, who get to sell many more replacement high-tech parts when the originals fail well before the life of the simpler parts of the car. My last car required oil changes, (infrequent) cam belt changes, exhaust changes, the odd spark plug changes, but not a lot else. And as it was pre-cat, none of that stuff. Enough space under the bonnet to do a cam belt change without removing much. I couldn't fit new headlamp bulbs in my Focus and the guy at my local garage took a few things off first.

- Steve

 

[controlsdude]

But their is major shortage for controls engineers. I must get like 5 calls a week people looking for controls engineers.

 

[ajh1]

One of the things that was emphasized when my son was in college (chemical engineering and metallurgy) just a few years ago was that, of course, you have to be technically competent, but in addition if you want to insure a job in the future you also had to master communication skills, leadership skills (not necessarily management but the ability to guide and inspire others in the course of your projects), and the other so-called "soft" skills. They recognized that the engineer who is ONLY technically competent, no matter how skilled, is easily replaced in the long term. The engineer who can think, plan, and develop those plans will always be in demand.

 

[JohnRBaker]

It's like in my senior of engineering school, back in 1970/71, they suddenly altered the curriculum adding a class in what was called at the time 'Report Preparation' and they made it mandatory for graduation, even it you were in your senior year. Now this was back before the days of PowerPoint but we did learn to prepare overhead projection slides, poster-board charts and graphs, and other multimedia 'props'. We also had to give stand-up presentations which were videotaped (this was also fairly new technology) so that peer-reviewed critique sessions could be held afterwords.

John R. Baker, P.E.
Product 'Evangelist'
Product Engineering Software
Siemens PLM Software Inc.
Industry Sector
Cypress, CA
Siemens PLM:
UG/NX Museum:

To an Engineer, the glass is twice as big as it needs to be.

 

[cranky108]

It's not just controls engineers that are in short supply. Also Power engineers are in short supply, but some how the laws of economics don't seem to apply to engineers. Positions go empty, but pay dosen't go up.

What is also amazing is no one seems to be offering training positions.

Sort of like business types refuse to allow engineers to be paided more. Talk about a glass roof.

 

[zdas04]

The MBA Human Resource model shows people as a commodity. Any Engineer can replace any other Engineer. Any Machinist can replace any other Machinist. Any Surveyor can replace any other Surveyor. etc. With that outrageous model, there is no supply shortage so there is no reason to adjust compensation. The homogeneous model sets the wages, the reality of human differences keeps the seats from being filled. When I had a role in hiring, HR would send me 200-300 resume's for any opening I was looking to fill. In that list I'd usually find a half dozen people who actually appeared to be qualified for the opening, with at least one of them getting in the door with a falsified resume, and 3 more that had "interesting" definitions of experience (one time "extensive pipeline design experience" meant that one of the groups in their Senior Design class had presented a pipeline project and the individual whose resume I was reviewing had sat through the other group's presentation).

David Simpson, PE
MuleShoe Engineering

"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
The plural of anecdote is not "data"

 

[moltenmetal]

Control engineers may be in short supply, but a control engineer buddy of mine said it best when he complained that he was "highly employable but without job security". Companies like to hire experienced control engineers on contract rather than hiring contractors to do the work, but then ditch them when the project is done.

Cranky has it correct: most of the so-called "shortages" in engineering are shortages without evidence- succession planning problems masquerading as labour shortages for the most part. A shortage without steeply rising wages isn't a shortage, it's bullsh*t.

 

[SnTMan]

moltenmetal, well stated

Regards,

Mike

 

[loki3000]

are control engineers mechanical or electrical engineers?
SCADA, PLC and such or something else?

 

[cranky108]

At one time they were mechinical engineers, now they are more electrical.

 

[ornerynorsk]

Electrical. Just went to open house with my youngest son, and their eee program is very heavy into controls.

It is better to have enough ideas for some of them to be wrong, than to be always right by having no ideas at all.

 

[kylesito]

I know this is an old topic but I recently heard a representative from the Cato Institute give a speech that gave me an entirely new perspective on outsourcing. His position was that outsourcing is actually a positive sign of growth for an economy. Essentially, outsourcing indicates that the skill of the workers has elevated beyond menial tasks to more advanced knowledge and this should be embraced. Higher skilled labor raises the standard of living, lower skilled labor does not promote growth.

It seemed like an interesting perspective and one that made me think. I had always considered outsourcing a signal of a struggling economic outlook, however, if his arguments are to be believed, then it isn't that case.


PE, SE
Eastern United States

"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi

 

[moltenmetal]

kylesito: yep, that sounds like typical CATO trash to me.

Rubbish: outsourcing is a natural part of the functioning of a free market, made more free by liberalized trade policy and the elimination of tarrifs, and extended from competition for goods alone to competition for services too by virtue of communications technology improvement. It's not that workers in the developed world are so skilled that they don't want to get their hands dirty any more! That's horsesh*t, pure and simple!

Businesses are algorithms which exist to maximize profit and value for shareholders. The employees are mere parts the algorithm uses to accomplish its goals. Businesses are not people- they have no "morality" and cannot reasonably be expected to be "moral actors". As a business, if you can make a part and make a profit selling it, you make it. If you can buy an acceptable part for vastly less from someone else, wherever in the world they may be, and still sell it for the same price, or for a lower price so that you capture more market share, you make more profit- and you can get rid of the cost and risk associated with running a manufacturing operation, including those troublesome employees. Same goes if you can replace employees with automation, a better manufacturing process etc. It's natural capitalistic "creative destruction", though the creation is going on where the costs are lowest.

Yes, it's easy to suboptimize and to make the wrong business decisions in that insource/outsource decision making process. It's only cheaper to pay someone else to make something your own staff can make if you intend to fire the staff when they're not making those parts for you. Businesspeople frequently do the economic calcs incorrectly when they consider the in-source versus outsource decision. Here, we only outsource tasks we can do or products we can make competently when work in hand takes us over 100% utilization, because we know we're going to keep our staff. And before you consider that some kind of a moral decision, I caution you that it isn't: it's a business decision pure and simple. Those people are valuable to us and required to do tasks that we cannot outsource, and we've invested time and money in training them, so we're keeping them so they can make money for the business. Doesn't matter how you do the calcs, commonsense tells you that it never pays to have your own staff idle while paying someone else their cost AND profit to do work those people could do competently.

 

[zdas04]

Moltenmetal,
I had several of the same thoughts, but not the time to write them out. Your explanation covered my points.

A controlling factor in the in-source/out-source decision is total life cycle costs (including the cost to hire, train, and replace staff). We are starting to see energy-intense industries moving back to the US, but the new plants being built tend to be highly automated (small labor staff). With our energy costs about 1/5 of the world price, and our labor costs about 20 times the world price it makes sense to minimize labor while taking advantage of plentiful energy.

David Simpson, PE
MuleShoe Engineering

Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat