Who is to blame for US outsourcing 39

[EngineerDave]

I bring this up not to start a political war. I am an independent by the way but find myself leaning more towards the conservative side as many engineers do.

Democrats are starting to blame Republicans for loss of jobs due to outsourcing.

The way I see it both Democrats and Republicans are responsible for not securing good trade agreements. It seemed both supported NAFTA heavily in 1992. That is but one small treaty governing trade for North America.

What is the solution. I honestly don't believe any politician will have a solution for such an economics driven problem.

 

[WHEngineer]

Outsourcing may be inevitable, but we must all look at the consequences. CEO's outsource to guarantee their bonuses (There's a question as to whether they are serving the shareholders based on companies losing money yet still rewarding their executives). The CEOs are looking at the short-term picture and are missing the long-term problem. If we are buying the imported goods and services, what happens when our economy shrinks to the point where we can't afford to even buy the cheap imported goods. The modern generation of MBAs seem to have forgotten some of the wisdom of past business leaders such as Henry Ford. Against the will of all of the other automakers, Henry Ford went against conventional wisdom and raised his worker's pay to the now famous $5/day. The reason Ford raised the wages was that only a limited number of people could afford to purchase cars at that time. By raising wages, his workers then made enough money to be able to afford cars themselves, thus creating a huge new market. If only our CEOs were smart enough to think so proactively.

In addition, do we really want to outsource our national security? We have lost most of our manufacturing ability and continue to outsource more each day while transitioning to our "service economy". At the same time, China, a traditional communist enemy is expanding its manufacturing base with our help. They even have an ambitious space program which includes development of ballistic missiles. So what happens now that we have reached the point where the machine equipment to manufacture our next generation of weapons must be purchased from China. Will our service economy defend us on the battlefield against 1 billion Chinese with advanced manufacturing techniques. And to help emphasize the message, please look at recent news reports about our joint air manuevers with India - their pilots beat our pilots in joint exercises. We need a wake-up call before we lose our country.

 

[profengmen]

Bad analogy:
Ford only hoped that his workforce would be smart enough to save enough money for a car. He created the $5 a day for productivity and control, and gave it up after a few years because it cost the company too much.

http://www-personal.umd.umich.edu/~ppennock/L-FiveDollarDay.htm

CEOs and MBAs know this story well.

 

[makeup]

I think the point trying to be made is correct. Years ago we would have all fort this move through unions but now we all choose to live very insulate life styles. We no longer really care what happens to our neighbour, stick your head in the sand and let someone else worry about it and I'm alright Jack rules today. Its not about free trade or evolution because at the end of the line will be a few people making a huge amount of money at the expence of someone else. Which of those companies that have outsoursed have passed any of the benefits to the end user? Ok things might be cheap today but they are really poorly made, shoes cloths and elctrical items will now break before they where out.

 

[EddyC]

The readers of this forum are thinking too much like engineers. They are trying to find logical arguements for or against outsourcing/offshoring and looking at how this affects the entire world instead of just themselves. Its time to think like regular people and be a little selfish regarding this issue. Ordinary people are generally for anything that puts money in their pocket and against anything that takes money away from them. I seriously doubt that after someone loses their job due to outsourcing/offshoring they can go to the bank that holds their mortgage and say: "Your going to have to wait until the long-term economic benefits of globalization kick in to get paid".

 

[controlnovice]

Outsourcing is nothing new. The NorthEast was the region for textiles. Then the Southern States offered lower wages and the companies moved. Then Mexico, then Honduras, then Korea, now China.

Why shouldn't we be concerned with improving the lives of others? Why not send some jobs overseas if they can do the job better for less money and improve their quality of life? There are some that keep referencing the loss of Auto manufacturing jobs. The 1970's should have taught American Auto companies a lesson. The Japanese were making better quality cars, less expensive. Why wouldn't the American puplic want to buy that? But American manufacturers just kept doing the same thing with the same high paid workers. And the workers kept asking for more money.

My company is building in China. You know what? I'm learning Chinese on my own to help maintain my job. Ya, I may lose my job to a Chinaman, but I've improved myself by doing so, and improved my chances of sticking around.

When I started here, we had a department of over 60 people. Now we're down to 18. I'm still around not only because I'm a decent engineer, but I learned to speak French and Spanish. I learned control systems when my background was electrical power systems.

If I loose my job, I'm prepared to sell the house, the second car, etc. I'm prepared to move somewhere that may be uncomfortable. I'm prepared to do something new.

I guess what I'm saying is if you're afraid of losing you job due to outsourcing, you can do something about it. Change yourself.

 

[onyx01]

First, two different points of view. Outsource and Off-Shore. A point listed above by metengr states it best. But here is my opinion.

Outsourcing allows a company to invest and focus on its product/service. You outsource to a company who specializes in a process and it can save you time and money.

Off-shore sourcing is just a cheap way to get something done. I am a Catia product designer, however I create more conceptual and feasibility data. In my experience with sending work off-shore, they do not have the creativity and experience to do the type of work I produce. However they can make drawings, section layouts and what I concider "grunt" work while I can get the real product developed.

Now for my high horse. We are all to blame for outsource and off-shore work. WE need to have new cars, new homes, new ___fill in the blank. To get these possessions we work, and get paid. Some get paid very well. We invest in stocks, and we want a good return in our investment. Therefore we push our companies to cut cost and make profit so we get dividends. Well to cut cost they cut jobs, outsource work state-side and off-shore, and then they become more profitable. The cycle continues.



Brandon Jacobsen
Product Design Engineer - Catia

 

[PSE]

Interesting article. I am not sure if the link will take the user directly to the .pdf

http://www.dfma.com/truecost/paper.pdf

Regards,

 

[GregLocock]

Well that's quite an interesting study, albeit written with one eye closed. I wonder if the authors would rather work all day in a field for $0 or an Etch a Sketch factory for $3 a day? That is the stark choice facing the Chinese population.

Here's a better idea than whingeing about low labour cost advantages: why don't USA companies go to Chinese companies and offer to redesign their products to make them cheaper and better?









Cheers

Greg Locock

 

[PSE]

Greg,

Growing up on a farm prompted me to get into engineering in the first place (easier work and more pay) . The study is likely of interest to those companies doing assembled products (they did not show any case studies of base component costing comparisons). After all Boothroyd/Dewhurst deals primarily with consulting with Design for manufacturing/Assembly. Still, I think their comment on the total cost of procurement (logistics, tied up inventory, configuration control and stability of supply) has merit. Time and again when I do a costing analysis for a new product, by far it is component related rather than labor related. I am also trying to shift my personal measure of success not from cost reducing product where I work but in avoiding cost up front in the design. Yes it makes me a pain in the ... at times to the design engineers but when you can back it up with $, it helps make points.

Regards,

 

[KernOily]

Comes now this from the ASME Capitol Update, dated today:

5. U.S. Job Losses from Offshoring Double between 2001 and 2004

A study recently released by the U.S.-China Economic and Security Review Commission estimates that during 2004, the U.S. will lose as many as 406,000 jobs as they are shifted from the U.S. to other countries. The figure compares to 204,000 jobs in 2001. Nearly one-fourth of the 2004 job losses are expected to go to China. Mexico and India are the other significant beneficiaries of the offshoring trend.

While the conventional wisdom in the U.S. is that companies need to offshore jobs to remain competitive, the report also says businesses engaged in production shifts "tend to be large, publicly held, highly profitable, and well established... The principal motive for production shifts to China is cost reduction rather than producing for the Chinese market."

The authors conducted an extensive media-tracking exercise that examined a broad array of media sources for news of firm and job relocations. The study covered the period January 1, 2004 to March 31, 2004, and constitutes a follow-up to a prior study done for the Commission covering the period October 1, 2000 to April 30, 2001.

The Commission has been on the front lines urging Congress to enact corporate reporting requirements to get this vital information, and this report further highlights the need for such measures.

Among the key findings of the study are the following:

Production shifts out of the US particularly to Mexico, China, India, and other Asian countries have seen a major increase in the last three years.

The report projects that nearly 100,000 jobs will move from the U.S. to China as a result of production shifts in 2004 based on extrapolating the data it collected during the limited period of the study.

The data suggests that in 2004 as many as 406,000 jobs will be shifted from the US to other countries compared to 204,000 jobs in 2001,” of which nearly a quarter will go to China. Production shifts, with consequent employment loss, have spread across the economy and now affect sophisticated manufacturing industries, services, and information technology. All regions of the country are impacted by these shifts, but the Mid-West has been especially hard hit.

The study states that the principal motive for production shifts to China is cost reduction rather than producing for the Chinese market. In the study, the number of jobs lost because of production shifts far exceeds that reported by the Bureau of Labor Statistics in its report on mass layoffs due to overseas relocation. Also, the study reports that trade adjustment assistance to workers laid-off owing to overseas job relocation is poor, covering less than one-third of the cases where production shifts occur.

The entire report and additional information on the Congressionally mandated Commission is available at:

http://www.uscc.gov/

More Offshore related reports, articles, and resources can be found at

http://www.engineeringpolicy.org/outsourcing.html

Patti Curtis handles offshore outsourcing issues for ASME. She can be reached at curtisp@asme.org


Thanks!
Pete

 

[Tobalcane]

<

http://www.boston.com/business/articles/2004/11/17/offshoring_accelerating/>

“The most compelling incentive remains the disparity between wages earned in the United States and in less-developed nations. In India, a computer programmer with a college degree and two or three years' experience earns about $20,000 a year, said firms that employ workers there. Indian workers who process financial transactions make $12,000 to $15,000. Call-center workers there earn about $1,200 a year, compared with Brightman's $40,000 salary from AT&T.”

I did not want to bring this thread up again because it is so negative, but wow this is what we have to compete with. Just for a call center worker who only makes $1,200 per year is disturbing compared to $40,000 for the same job here (USA). Their standard of living must be very very very cheap. In the spirit of this thread, can we really blame AT&T for trying to make a buck?


Go Mechanical Engineering
Tobalcane

 

[zekeman]

BUY FOREIGN MADE PRODUCTS AND NOT ONLY WILL YOU LOSE YOUR JOB BUT WE WILL LOSE OUR MIDDLE CLASS AND OUR GOVRNMENT WILL LOSE ITS PREEMINET POSITION IN THE WORLD, NOT TO MENTION ITS ABILITY TO SECURE ITS BORDERS.

 

[4Pipes]

It's probably been mentioned above but I'll repeat it.

What is the value of the accumulated experience lost when local staff are laid off ?

What is the lost opportunity cost of experience not being gained by local staff ? eg. Designers need to understand production problems to progress to better products.

What is the cost of the real risk of poor corporate memory ?

I'll wager I won't get a reply from the men in suits.

 

[BigH]

Rather than outsourcing, I went overseas to work. I guess they are outsourcing me. Sadly, the pay and benefits are getting lesser with each job - but only a couple of more . . .

 

[GregLocock]

"What is the value of the accumulated experience lost when local staff are laid off ?"

What is the value of working with a new team that does not have entrenched ideas?

"What is the lost opportunity cost of experience not being gained by local staff ? eg. Designers need to understand production problems to progress to better products."

What is the value of setting up a green field operation with colocated designers?

"What is the cost of the real risk of poor corporate memory ?"

Um, how good is your corporate memory anyway?

Your glass is half empty.

Cheers

Greg Locock

 

[HgTX]

A: What is the value of the accumulated experience lost when local staff are laid off ?

B: What is the value of working with a new team that does not have entrenched ideas?

If you have all of either one and none of the other, you don't have the best situation. You need *some* new people to come up with improvements, but you need the old wisdom too so the new people with the new ideas don't waste valuable time reinventing the wheel, or rather rediscovering why a particular wheel won't roll.

Packing up and going somewhere else definitely loses you all of the old wisdom. Who says the team was necessarily all that entrenched before it got outsourced?

Hg

 

[paulfrancis]

The current worries over outsourcing are probably temporary. The Indians and Chinese will get a LOT more expensive in the years to come when the dollar crashes in value relative to their currencies. It's already begun to crash against the Euro. It is starting to crash against the yen. It will almost inevitably crash against the Indians and Chinese currencies too, unless they are willing to tolerate massive inflation. But, even if they are, then in that case inflation will make the Indians and Chinese a lot more expense. Either way, the Indians and Chinese are almost certainly going to get a lot more expensive fast going forward. Massive current account deficits lead to a plunging currency and the US is running the largest trade deficits in the history of the world. The dollar should plunge the most against countries it is running deficits with, like China and India. After Indian and Chinese engineers get a lot more expensive and these countries are no longer sources of dirt cheap engineers, I think engineers will FINALLY be rid of the dirt cheap foreigner problem that has plagued it since like the 1950's. Back then it was the Japanese though. In 1971, a dollar bought 358 yen, now it buys 102 and falling. That 71% collapse in the value of the dollar relative to the Japanese currency was a big factor in Japanese engineers becoming a lot more expensive. This is assuming that Africa and South America don't become the next source of a massive number of dirt cheap engineers. That is probably an easy assumption though. I only wish it would hurry up already.

Paul

 

[WHEngineer]

Ok, you guys with the lowest cost theory of world trade have got me convinced. Since my company relies on working at individual local sites (many of them are those well compensated executives), I don't have a need to worry about my job. Therefore, I will ignore the results of offshoring and enjoy my German car, my Indian Computer (alas, the microprocessor is still US), my new HVAC system made in Mexico, my electrical panels and switches made in Mexico, as well as my home remodeling performed by Mexicans (they work cheaper and it's hard to find Americans to do the work). It eases my conscience to know that those who need jobs just have to be satisfied with what they can find. After all, our $5.00/hour minimum wage jobs are dream incomes for many of those inhabitants of third world countries.

Also, some of our advanced technologies, such as the F-22 Raptor are on the congressional chopping block - I know a number of Lockheed-Martin workers at the Marietta, GA plant who livelihoods hang in the balance as our legislators decide if we really can afford these new toys. Federal Debt vs. National Security - this will be interesting!

 

[GregLocock]

Incidentally did you know there is a labour shortage in South China at the moment which is forcing wages up?



Cheers

Greg Locock

 

[BillPSU]

What's the cause for outsourcing? Immediate gradification of greed. I interviewed at a company recently and the company's guideline for buying new equipment, a two year ROI. First off an ROI calculation means you actually invest the money and secondly you have other places to invest your money to generate these returns. When these investments are finally made the company doesn't buy the equipment it leases it and how many places are available today to give a 50% return on investment or even a 25% return.
Thinking long term is not in Wall Street's equation and taking a risk is unacceptable. Its easier to buy a product and sell it instead of building a plant to make the product and selling it.