Larry Butz May 2005 How Does it Affect Me?. Outline Why Manufacture/Source Overseas Types of Manufacturers What to Expect The Differences The Risks “Insourcing”

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Presentation transcript:

Larry Butz May 2005 How Does it Affect Me?

Outline Why Manufacture/Source Overseas Types of Manufacturers What to Expect The Differences The Risks “Insourcing”

Why Manufacture/Source Overseas? Lower Costs Access to Overseas Markets

Excess U.S. Cost Burden

What is the Objective? “We are not chasing labor costs, we are chasing productivity." Michael Dell Sydney, Australia April, 2004

Forbes Top Ten for Outsourcing India China Malaysia Czech Republic Singapore Philippines Brazil Canada Poland Chile

China Two Shanghai Factories Unitary HPs and Cooling Units Hermetic Recips Optimized Products Equipment Selection Process Optimization Quality Standards Supplier Qualification Factory Layout

What to Expect Lower labor costs Lower raw material prices Lower component/sub- assemblies costs Range of quality levels available Fewer constraints (regulations) on factories

Types of Manufacturers State Companies Wholly Owned Locally Joint Ventures Wholly owned Foreign Your Own – Build or Buy

How to Find Government Agencies Industry Directories Web Bidding Networking Shows & Exhibitions

Where to Find Heavy Industries Light Industries

Be Prepared for Change Longer Pipeline Reduced Flexibility Change Control Cultural Differences Language Societal Value Systems Business Customs National Laws

Be Prepared for Change More Administrative Personnel Logistics - Import/Export Banking/LC/Currency International Law Communication Time Difference Language

Product Modifications The relative cost of equipment vs. labor is significantly different. Expensive labor saving equipment used in the US may not be the best choice overseas. Be prepared to make changes in your design specifications to obtain best results.

Evaluate All the Differences Location Legal/Patent Language Cultural Resources Political System Logistics Taxes Laws Safety Standards Currency Infrastructure Environmental Business Customs

Risks Currency Variations Proprietary Design Info Political Stability Security Energy Availability Hidden Costs

Packaging Communications Import/Export Taxes Waste/Shipping Damage Legal Travel Product Redesign Administrative Personnel

How Competitive & Stable is Your Outsourcing Candidate? Global Competitive Index

Areas Covered by Global Competitive Index tax and regulatory environment labor market legislation overall macroeconomic environment quality of the country’s infrastructure prevalence of corruption education

Global Competitiveness Index By World Economic Forum Oct 2004 China 46 Mexico 48 India 55

Deloitte Consulting Study “…some major corporations are reassessing outsourcing in light of significant negative experiences…and failure to achieve expected cost savings.” May 2005

Insourcing Sourcing within your own country

Advantages of “Insourcing” Quicker Response Times Flexibility (“Specials”) Customer Visits to Factory Proximity – Designers & Manufacturing Language/Culture/Customs/Values

Summary We are all Part of a Global Economy Don’t Fight it Plan for it Use it to Your Advantage Know All Your Costs Look Beyond Costs Outsourcing – Is a part of the solution Offshoring or Insourcing