Friday, April 4, 2008

Least cost management strikes again!

Another of Texas’ major, homegrown, successful companies has decided to outsource more of its manufacturing to Asia (read: Communist China). This is not as much of a surprise as it is a major disappointment, because a great many of the manufacturing jobs in the USA that have gone offshore have gone to Communist China.

The question that most executives need to ask themselves is, “when I replace a skilled worker making, on average $50,000 per year, with 10 much more modestly skilled factory workers making less than $2,000 per year… Who will buy my product?”

It has been the policy of the executives of most of the companies in the USA to seek the least cost solution to every problem; the panacea of modern manufacturing mentality. Why? Because least cost is most obvious, requires minimal thought, and generates the kind of immediate profits that inflate management bonuses.

In study after study, published in business journals, it has been documented that in the long run (longer than 3 months) the most efficient solution is ‘best value.’ That is the highly automated factory with a few highly skilled (read: well paid) workers generates the most efficient, highest possible quality output of goods. But this is risky (read as: more costly) because if, in that first three month period, ‘best value’ is not well managed and executed it will take longer to reflect the inherent operating efficiency; management speak for lower bonuses.

Another least cost management favorite is the imported, skilled worker. Why is this bad? Because, the least cost management practice brings these workers in to provide skilled labor who don’t expect to make as much as the prevailing wage. Instead of hiring good, local talent and training them for the job, least cost management brings in skilled foreign workers that are already experienced, and pays them less. Saves money in that critical three month window; better bonuses.

Yes, least cost management saves you money in that critical quarterly window, so be a good team player and don’t risk thinking about ‘best value,’ because if my bonus is negatively effected your long term employment…

Oh, just be a good team member!

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