1. Larry Butz May 2005 How Does it Affect Me?

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

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

7. Excess U.S. Cost Burden

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

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

11. China 1982-84 Two Shanghai Factories Unitary HPs and Cooling Units Hermetic Recips Optimized Products Equipment Selection Process Optimization Quality Standards Supplier Qualification Factory Layout

12. 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

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

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

15. Where to Find Heavy Industries Light Industries

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

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

18. 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.

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

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

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

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

23. 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

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

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

27. Insourcing Sourcing within your own country

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

29. 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