Quote:
Originally posted by jyl
Compare the cost of labor in the US to the cost of labor in China.
How much would US taxes, workers' comp, healthcare, etc have to come down to equalize manufacturing costs?
For example, the account you are trying to keep, where the customer is sourcing from China - what is their per-part cost using the Chinese factory? How does that compare to your marginal per-part cost (i.e. variable cost)?
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I actually have intimate experience with this. The answer is not as much as you'd imagine.
Shipping on manufactured goods is huge, we all know that. What people most often don't think of is cost of poor quality or even confusion. When it takes three weeks to get here on slow boat .....and then it's wrong!!! Sweet mama did that just screw up everything. Not to mention the three weeks worth of production that was being made while the product was sailing over here is all bad too. I could go on and on, but you see the point.
When I lost the business to China they were saving 20%-30% by doing so. They said they would stay for a 10% decrease (knowing that the Chinese road will have the bumps mentioned above) but they just couldn't get that from all the companies involved here(maybe 8). They are now hinting at bringing it all back as they are missing shipments to customers and quality is down.
We're not that far off and as fuel prices increase we will get even more competative due to increased shipping costs and increasing wages over there.
But my example really isn't a good one as I'm just a feeder, my customer is the manufacturer and they are the ones that would leave eventually which would solve many of the time/distance issues mentioned above for them.
What are we doing as a country to keep my customer here?