I guess in a strange way it’s a little heartening to hear that the U.S. isn’t the only refuge of outsourcing wackos. From our friends down under (and a little to the east) comes the story of Dr. David Skilling of The New Zealand Institute. In a stroke of rather convoluted logic he is suggesting that New Zealand’s economy would grow if… get this… manufacturers moved their factories offshore.
At first glance I can somewhat comprehend where he’s coming from: most of New Zealand’s industrial customers are overseas, and it is often a good strategy to be closer to your customer. But at the same time these aren’t large or heavy industries, and building a factory in Australia still means you’re about the same distance away from the rest of Asia. But here’s one statement that shows the fundamental flaw in his logic:
Skilling says the knowledge intensive part of the job will be retained in New Zealand but the production activity will be increasingly taking place overseas closer to markets.
I don’t know about you, but I’m starting to get a little tired of manufacturing always being relegated to knuckle-dragging caveman status. Factories, especially those leveraging lean manufacturing, can be complex little beasts requiring some creative brainpower to run.
Sounds eerily familiar to what we’ve been going through in the United States. First some young whippersnapper MBA’s emboldened with their new knowledge of traditional accounting decide it actually makes sense to get rid of tens of thousands of years of knowledge and experience to save a few bucks an hour overseas. Don’t worry about the long supply chains, training and turnover costs, intellectual property protection, and the fact that all the outsourcing lemmings that follow you will drive the wages up so you’ll be moving your factory again in a few years.
But later those same geniuses realize that their traditional accounting metrics are telling them that more savings are needed to compete, so design and development and service are also moved overseas. Why not? It’s cheaper, isn’t it?
But does it really add value to the customer? Or is it just appeasing investors with a short-term mindset? There is another side of the story. Some of our New Zealand friends recognize the value of a strong domestic manufacturing base.
It would be hopelessly shortsighted to think we can shift our production base offshore without caring about the impact this would have on our communities, and on the skills base essential to the creative industries that we are seeking to nurture. The fashion industry for instance, still requires the local clothing industry for its inputs of skills, experience and expertise.
And then of course there is an interesting fact that would make following Dr. Skilling’s advice just a tad difficult, at least for one industry.
The sober reality is that the New Zealand economy is based on primary exports, from New Zealand farms, which cannot be located offshore.
Yes, relocating a farm offshore would be a pretty neat trick. Hang in there friends; I’m guessing that as with our country there are many examples of New Zealand companies that have become globally competitive by focusing on reducing internal waste and optimizing customer value.