Back when the Chinese iPod factory was in the news (prison or not?), I asked if people would be willing to pay more for an American made iPod, you know, give people a choice, the way Starbucks “lets” you pay more for “Fair Trade” certified coffee. Depending on your budget and ethical stance, you could choose to pay more to support American workers.
Well, today’s WSJ had an article (free version here) about companies (not Apple) who are giving customers exactly that choice.
“Pacific Plastics & Engineering, a privately held Soquel, Calif., maker of specialized devices for medical companies, lets customers decide whether to have their product made in California, or — for at least 25 percent less — at plants in India or Taiwan. “We give our customers a choice,” Chief Executive Officer Stephanie Harkness says. “We don’t ever pull the wool over their eyes.””
So does anyone actually choose to pay more?? In the case of another company:
“…15 percent and 25 percent of his customers opt to have items produced at Tech Group plants in Latin America; the rest choose from its plants in the U.S. At least four of his firm’s competitors offer their customers a similar choice, he says. “It’s absolutely what customers want,” says Richard Harris, chief executive of United Plastics.”
These aren’t consumers making these choices, these are “B2B” transactions, with contract manufacturers.
It’s not just manufacturing companies giving you choice abot offshoring:
“Online lender E-Loan gives consumers the option of having mortgage applications processed faster if they have it reviewed by workers in India. The company says roughly 80 percent to 85 percent of customers choose the Indian option, which saves E-Loan money on labor costs. Some companies that deal directly with consumers quietly outsource back-office work; E-Loan says offering this choice is part of its strategy to build trust and loyalty with consumers.”
I wouldn’t expect time to be an issue with E-Loan, but with the manufacturers, you’d think that the higher price would also come with a faster lead time, if things are built here in America. That’s a logical tradeoff — cost versus time. The real essence of lean and, dare I say it, “just in time” is that you want your suppliers to be close by. Toyota does this and they are doing it with their factory in San Antonio. Sure, the labor might be cheaper in India or China, but is TOTAL COST cheaper with the offshoring? Maybe not, when you consider the extra time, which means additional risk and additional inventory (or slow response to market).
It might be cheaper to pay 20% more for a locally made product. That’s not really intuitive to non-Lean thinkers, is it?
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