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How to Do On-Shoring Right

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Hailey Lynne McKeefry
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Re: How to Do On-Shoring Right
Hailey Lynne McKeefry   4/29/2014 4:33:48 PM
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Thanks for weighing in on the conversation, Harpat949. We just published the last installment of a six part series on ON-shoring that may be of interest to you. Check it out:
 


harpat949
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Re: How to Do On-Shoring Right
harpat949   4/29/2014 3:26:50 PM
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One has to be careful interpreting "our labor cost is only 3%" The cost of acquiring and maintaining robots has to offset the labor cost saving. What if the robot cost is 10%. An offshore factory without robots may add "just for example 6% labor cost" and 0% robot cost.

This is not very clear from the statement but certainly robots are not free. But if you are not in a business with cut throat competetion, there is lot of flexibility in labor costs.

Automation has its risks. Some 40 years or so ago, a company started making computer modules in a fully automated factory, by the millions. There were practically no humans in the factory. A design glitch was discovered after a million modules came off the line. That required rework by humans. The company instantly folded. Robotics may have merit when you are making relatively high value products in moderate quantity or when there are no design glitches.

We all see these 18 wheelers running around our highways, carrying goods rather efficiently. It makes sense when you pay a truck driver 40 doolars an hour or so. But now there is $300,000 overhead plus maintainence and insurance costs. Compare this to a Chinese guy carrying 50 computer boxes on a pedal powered rickshaw at perhaps 50 cents an hour. Of course, it maytake 10 or 20 of these guys to do the job. It will still cost less than 10% than with our truck drivers. Long distance moving they do by railroads. China may have changed since I saw that but the point is heavy machinery and automation often cannot compete with super cheap labor.

Automation sometimes appears to dull the wits. I was visiting India, a few years ago and I saw something I could never forget. Miles of an old tar road were dug up manually by 3 or 4 skinny guys (who were probably paid 30 cents an hour). The only tools they had were long crowbars they inserted in a hole and used them as levers to pull up huge chunks (perhaps 2 ft chunks. Here in the USA, I often see a road worker with huge rig(which perhaps cost 100 grand or more) pounding the road for hours to dig a hole for something. 

Brian Fuller
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Re: Good reasons for onshoring
Brian Fuller   3/28/2013 2:32:02 PM
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You've hit on two of the big ones. There's also the argument to be made that you should be manufacturing near your target markets for optimal feedback and distribution effiiencies.

 

HM
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How to Do On-Shoring Right
HM   3/27/2013 6:25:49 AM
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If the labor cost is only 3% of the manufacturing cost, then ofcourse it makes sense to do at on-shore.

Eldredge
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Re: Good reasons for onshoring
Eldredge   3/26/2013 8:01:07 PM
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@ Mr. Roques - good question. Beyond the usually touted inexpensive labor, one potential reason may include lack of available capacity, at least in the case of quick-turn manufacturing situations.

Mr. Roques
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Re: Good reasons for onshoring
Mr. Roques   3/26/2013 7:36:56 PM
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So what are some of the bad reasons to onshore? More regulation? Higher taxes?

Eldredge
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Re: Good reasons for onshoring
Eldredge   3/26/2013 12:56:25 PM
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@hash.era - good point - the shipping costs in the equation depend on where raw materials are located, where production occurs, and where the markplace is located. In the global marketplace, that becomes more complicated.

hash.era
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Re: Good reasons for onshoring
hash.era   3/26/2013 12:44:35 PM
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@Eldredge: Good one but does it have the option to ship to any part of the world currently ? Or is it limited to US ?

Eldredge
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Good reasons for onshoring
Eldredge   3/26/2013 9:54:19 AM
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Mr. Fernandes identified some excellent reasons for onshoring. In addiciton, I would add reduced shipping costs, and better control of raw material quality. The IP aspect is very significant - once that is lost, it is impossible to get back.



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