WSJ.com – Made in USA? Now, Customers Get to Choose
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?
What do you think? Please scroll down (or click) to post a comment. Or please share the post with your thoughts on LinkedIn – and follow me or connect with me there.
Did you like this post? Make sure you don't miss a post or podcast — Subscribe to get notified about posts via email daily or weekly.
Check out my latest book, The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation:
I think you are correct. When you look at producing products across a global scale, it’s important for you to look deeply at your cost. It’s very easy for someone to look at the cost of generating the product yet fail to look at transportation cost, tariff acts ect… It’s case by case. What many companies are moving to, yes including Toyota is to produce products in the country of intent. That way you delivery cost is cheaper, you mostly utilize their supplier base and their citizens to staff the company. This will enable the local citizens to except this company more. There was a similar case with I believe Pizza Hut in Russia. It failed at 1st, but when the business strategy was revamped, they used local ingredients, people to run the business etc… it then succeeded.
One thing that people miss in this debate is the impact of buying foreign goods not just on workers, but on the dollar. Of course, international currency economics is not a pursuit to tread lightly in, but the very, very overly simple version of it is we keep buying foreign goods, foreign countries accumulate dollars, using those dollars to buy US assets and we essentially become either a country of renters (metaphorically speaking) or have to dramatically discount the dollar leading to massive inflation (sometimes estimated at 40%) to close the gap. Now if that didn’t make any sense, imagine the realities of the full and true story.