I realize this is probably not going to be a diary that most people like to hear. But with the voting down of the outsourcing bill yesterday, I thought I'd give my perspective.
I own a small business and the product we create requires a pretty tedious process. We did do a large % of the work inside our shop and have some employees that have been with us for awhile. I've tested the price of our product and we have it priced to maximize sales. Any lower, we'd sell too much to where we'd grow out of our location. Any higher, we wouldn't have enough sales to support the operation.
Looking to improve efficiency, I decided to outsource (locally) some of our work so we could focus on our strong points. We simply didn't have the space (nor could I afford expanding) to increase sales. The problem I immediately ran up against is that most shops had no desire to do the work I was asking them to do. They pretty much priced it to where I would say no. Others were willing to do the work, but they wanted to do it on their own schedule (squeeze it when they weren't busy). And still others just couldn't provide the quality we were looking for.
I should have said that I KNOW what the cost of doing this is and I know they were still making GOOD money by doing this job. I questioned one of the shops I worked with about why they were charging me so much and they said "I don't want to hire anybody else and there are simply more profitable jobs to go after".
Around the same time, I got a phone call from a guy we used to do business with that was now running a Chinese factory. He offered to send me a sample of the work they could do. When I got the sample, I was amazed. Absolutely stellar quality and at a good price. I know and trust this gentleman, and he assured me that the working conditions were US quality and their pay was a living wage for that area.
So, I did what I didn't think I would do and I placed my first order. I received it on time and the quality was excellent. And because I now had more finished product and didn't have to produce them, I lowered my price and sold more to my customers. And after I started to pickup my sales, I was able to hire a full-time customer service person to answer the phone and an extra person to help in shipping.
But it did leave me scratching my head. It wasn't that the price that I was paying was all that low. The cost of the product was higher than what I could do it for, but around the same as what I was getting charged locally. AND I had to pay shipping & customs fees @ $6K per shipment. So all in all, it ended up costing me MORE to get stuff from overseas. Not to mention the hassle of having to plan 3 months in advance as opposed to being a little more flexible.
The difference was the ability to find someone WILLING to do the work for me. Keeping it in house would've required a big increase in expense for me....and outsourcing it to someone else would've been ideal, but would've put me in no-mans land with a price point that was too high.
All in all, I don't feel bad at all about outsourcing the jobs overseas. I mean, I tried my best to find someone to do the job...and when they couldn't, I found the next best option. I was also able to hire another couple employees because of the uptick in business.
But it does bother me in a lot of ways that those jobs couldn't be here. Maybe in the future, I can expand and just start doing everything here, but that's not in the cards now. Even if I could get a bank loan, I'm not in a position to take on the extra monthly payment.
I think a lot of the problem has to come down to risk-aversion. For a business like mine, there is a risk to hiring and expanding. If I expand, I'm taking a gamble that I can sustain the business I'm doing. If I hire, I'm taking on that same gamble that I'll have work for my employees. If I outsource, I don't have to commit. It's a one-time thing. But at the same time, outsourcing in the US requires that business owner to make the same determination.
I don't know....I would love to go to China to see how they are doing it. Because I don't think it's all about US corporation greed. I think in a lot of ways it's just easier to get products made there. You send a sample, they make the sample, you pay deposit, and they send shipment. Maybe US businesses just aren't willing to take the risks they used to take?
Thoughts?