Return of The King - the Saga Continues - Why Offshore Jobs Are Returning
Outsourcing... the “O” word. That was then - this is now.
Not long ago jobs seemed to have a one-way ticket to anywhere but the US. Cheap labor was the lure and the stampede off-shore was troubling both to patriotic business leaders who needed to compete in a global market and to a labor force already hurting from “post industrialism” layoffs.
First, heavy manufacturing, then light manufacturing left. Then service jobs – call centers, financial services, even medical procedures disappeared at a quickening pace. Many said the handwriting was on the wall.
And yet even as the pace quickened, there were counter trends. Automobile plants were being built in the US and proving profitable; one of the the latest, a billion dollar KIA plant built in Georgia. We know why so many jobs left but why did the trend slow and in some cases, reverse itself?
In manufacturing, the premise seemed simple enough. You build a plant in Indonesia or in Bangladesh and staff it with two-dollar an hour workers, or half-dollar an hour workers and harvest the labor savings.
But what is the cost of the new plant vs. the labor savings? As long as manufacturing has a sizable labor intensive component, at some point when the plant's investment is paid off, the labor savings are free and clear.
But when is that day - that magic 'home-free” milestone? In many cases it never fully materializes. Here's why. As plants age they depreciate while at the same time, replacing parts and maintenance costs rise at increasing rates.
Newer plants are progressively less labor intensive, so the competitive edge of older plants tends to evaporate versus newer ones. Older plants becomes obsolete.
Today, we are historically at a point when the labor component in manufacturing can, with proper planning, diminish to a minor role. This is true not only for mega-plants with a huge set-up cost.
It is also true for lean, small manufacturing using CNC (Computer Numerical Controlled) machines. These have been around for over 25 years but their development http://www.youtube.com/watch?v=QsmiIeAkE-o&feature=related has reached a point where the labor component is almost minuscule.
Add 3-D printers (also CNC), and the new reality is, why chase cheap labor when you don't have much labor in your operation? For those selling in the US market, you save on transportation costs which have risen over 400% in eleven years and are climbing.
And utilizing fast paced communicating with native speakers, including first generation Americans, is quick and easy rather than cumbersome and problematic. Add to this, better business ethics, protection of a legal system that is 85% predictable, and $600 air fares to put out brush fires instead of $6,000 ones.
Manufacturing is returning (or not leaving to begin with) and even helping re-paint the so called “rust belt” with stainless steel and high tech jobs.
In service industries, call centers were perhaps the first to go and the most numerous type of service operation to off-shore. As some of the biggest names in American business anchored customer call centers overseas, those companies soon began losing market share because US customers could not or chose not to, understand agents whose English, though technically proficient, was not native to North America.
British idioms and non-native speech patterns in some areas, contributed to make communication stressful and counterproductive to helping customers understand, solve problems.
Overseas operations also harbored hidden costs that were never calculated in the lure of "cheap labor". Those costs, often substantial and recurring, were usually coupled with the frustrating inability to get almost any issue resolved.
"Pay a whole lot more, time and time again, to get absolutely nothing fixed," is how one frustrated executive summed it up. Broken promises and missed milestones proliferated. Call centers who outsourced to Ireland and Canada fared much better and kept their customer base intact. Call centers are returning to US shores in droves.
Quality agent training in customer relationship management is playing a strategic part in recapturing market share. Light and even heavy manufacturing is returning. A steel plant recently opened in Youngstown, Ohio.
US manufacturing grew at more than four times the economy as a whole, the first quarter of 2011 after dropping for the past thirteen years.
American quality and ingenuity is back and growing. Imagine that! What an interesting American century this is already proving to be.