It’s easy enough for people to shout at Apple for getting everything manufactured by Foxconn in China. Easy enough to shout at ll sorts of people in fact, Nike, almost all of the other textiles manufacturers, all the other electronics manufacturers. However, the whole process is rather more fraught with difficulty than many seem to think.
This is an interesting little tale of a small British company trying to reshore, perhaps onshore, production of certain textiles products. There are most certainly benefits of doing so:
Tainton saw an opportunity to slash his forbidding lead times, dramatically improve cash flow and reduce waste – the smaller production runs allow demand to be tested and the business to react to what shoppers want, he says.
There’s a great deal more flexibility in having everything close to hand. It’s also far faster to get a product to market. However, there’s one very serious problem:
A few months on, and Tainton cuts a frustrated figure: his experience of trying to manage a UK manufacturing base has been characterised by inefficiency, high levels of absenteeism and a skills shortage.
“Most young people in Brighton have degrees, but they often lack the life skills even to get to work on time.”
He’s been most shocked, however, by departing staff who have told him they regard unemployment as a lifestyle choice. “We’ve had lots who have just quit because they said they prefer to be on the dole and housing benefit,” he says. “I hate the waste. I felt sick with stress the whole time I was on the dole. I’ve found not everyone shares that view.”
Yup, despite high unemployment, he just cannot find the staff willing to do the work day in and day out. He’s not paying bad wages either: £8 and hour is £2 over minimum wage and up around $12 an hour.
Of course, no business location is perfect in every way, it is always a trade off between various options. In something that I’m doing at the moment I’d never choose China, where the labour is, because I’d never be able to keep any trade secrets. I wouldn’t use Russia where the specific technical skills I need are because it’s most unlikely that I’d be able to keep the business if it was successful. I’ve had a look at the UK but just planning permission for a pilot plant would take two years.
These trade offs can also change. I’ve heard a rumour that Zara has now decided to move some of its production back from China to Portugal. The difference between $300 a month and €450 a month in wages is overcome by that greater flexibility and faster turnaround times.
It is true that companies are horrible, nasty, profit maximising capitalist organisations. Thankfully. But the blend of these trade offs that maximises profits is rather harder to calculate than many seem to think.
Source Article from http://www.forbes.com/sites/timworstall/2012/03/21/ofshoring-and-onshoring-its-all-a-bit-more-complex-than-you-think/
