In Other Words…Off-Shoring Was Carried Out by Dumb Managers
Here’s an interesting paragraph I ran across in my recent reading ramblings:
“For instance, it was assumed that assembly labor was the significant, intractable piece of the pie, one that could easily be transplanted to foreign shores at great savings. Actually, that category of labor averages closer to 4-5 percent of product cost. Finished materials consume roughly 70 percent and overhead another 24-25 percent.
Piece parts were the very tip of the iceberg that somehow went to bid and largely decided overseas deals. This left behind fixed assets in plants, the same management overhead, increased travel, new customs fees, and greater outlays for logistics. Insufficient quality and time-to-market penalties were the other giants hiding under the waterline of standard accounting. Rarely were these factors assessed and attached to the part or assembly of parts under bid.”
I think this is a nicer way of saying:
“Much off-shoring was undertaken by managers who didn’t know what the hell they were doing.”