Common Sense on Offshoring and Lean


Democrat & Chronicle: Business

Let's hope this becomes the trend, rather than indiscriminate offshoring of manufacturing work to China. This is the second article now in a short time (here was the first) that talks about companies moving at some of their operations back from China to North America for benefits of speed over labor cost.

This seems like such common sense, but I'm glad they are seeing the light:

“In Sentry's case, the company had several reasons for bringing the production back to Pittsford, said Torsten Rhode, director of advanced manufacturing. Rhode said Sentry was looking to adhere to lean manufacturing principles and discovered the distance wasn't helping that effort.

“When your supply chain stretches over 12,000 miles, it's not very lean,” he said.”

In China, they had many problems, including all the ones you might have predicted:

“Businesses have found they can run into many troubles — high shipping costs, longer lead times, delays in customs at the border, production defects. Unreliable, or in some cases unscrupulous, foreign business partners can be another negative factor.”

What's also encouraging is that venture captalists and other analysts are preaching a message more nuanced than “offshoring is good.”

“Other companies are following the same trend. Last month, at a California conference put on by Red Herring magazine, several venture capitalists advised small companies against offshoring. One speaker said 50 percent of offshoring projects fail for small firms.

Computer executive Steve Lewis told the conference to focus on saving time, rather than just money, the magazine reported. “We're in the speed business, and India will slow you down to the point of near-death,” he said.”

Even college professors are getting in on the act:

“Harry Groenevelt, an associate professor of operations management at the University of Rochester's William E. Simon Graduate School of Business Administration, said he's not surprised to see companies bringing some work back home.

“The advantages are easy to see,” he said. “The costs are not that visible and some people tend to overestimate the savings.”

Groenevelt said he tells his students to be cautious when it comes to offshoring. “There are some things where it makes a lot of sense. But you can lose flexibility and you can lose the ability to react quickly, and while those things are hard to quantify, they do have a cost.”

What other examples do you know of where U.S. companies moved some or all production (manufacturing or software) back to the U.S.?

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Mark Graban is an internationally-recognized consultant, author, and professional speaker who has worked in healthcare, manufacturing, and startups. His latest book is Measures of Success: React Less, Lead Better, Improve More. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. He also published the anthology Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also a Senior Advisor to the technology company KaiNexus.

  1. Chet Frame says

    Eureka moved much of its manufacturing to China and moved back the fulfillment pieces. They have encountered higher inventories and higher costs than they had anticipated.

  2. Mark Graban says

    Realizing that China isn’t right for everything. That’s what I call a “Eurkea!” moment. I’m sorry, that was horrible.

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