Sunday, June 6, 2010

Offshoring – Gone Too Far?

One question that Larry and I get all the time is when do we think the offshoring trend will reverse and all those jobs will start coming back home to the U.S.?

Well, we don’t have a date but we think we’re seeing some signs that we’re close to the high tide mark.

Earlier, we blogged that when the cost differential between manufacturing in this country versus overseas begins to narrow the offshoring incentive will begin to disappear. We may be getting close to this event.

Recently, the media have been full of stories about worker suicides at manufacturing facilities in China because of low wages and poor working conditions. In particular, Foxconn Technology, manufacturer of iPhones and iPads among many other globally recognized brands has been receiving a lot of attention. See Elaine Kurtenbach’s Associated Press article from MSNBC for a good write-up ( ).

Even the Chinese Communist Party (CCP), never particularly worried about the status of its own downtrodden masses, seems to be concerned about the current state of affairs.

I’ve always been of the opinion that global offshoring and outsourcing has been based on a fallacy. That fallacy being that global companies could always find increasingly cheaper, educated pools of workers to happily provide world class products and services. The early adopters profited from this. Latecomers either had to pay more or move onto labor forces that were further removed both geographically and culturally from consumers.

I know of one global company whose outsourcing/offshoring teams are simultaneously chasing lower wage costs eastward across Europe and westward across Asia. They’ll probably collide somewhere in Kazakhstan sometime in the next few years. And then what? (Am I the only reminded of the “greater fool theory” from Wall Street?)

The game’s over folks or it soon will be!

I predict that the United States will begin to start bringing jobs back home. There will also be hiring to offset the additional job cutbacks in the pursuit of greater profits. China and other offshore destinations are not the only ones having to deal with a troubled work force. Eve Tahmincioglu, an MSNBC contributor, wrote an article this week concerning the rise in workplace suicides in the U.S. ( ). Economic problems are blamed. But, could what we’re seeing here in this country simply be the flip side of the coin that we’re seeing in China? What happens when American workers stop fretting about their economic situation, taking it out in themselves and decide to do something about it? Unions and confrontation with management have a long history in the U.S.. Maybe that 9.9% unemployment number may start to come down.

As always, we welcome your feedback. Please contact us at We look forward to hearing from you.

Contributed by Guy de Lastin

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