By Kevin Meyer
Just to make sure we don't get lulled into a false state of bucolic complacency with so many companies "re-shoring" back to America, there are still some stories of companies that didn't get the message. This week Callaway Golf decided to shed thousands of years of knowledge, experience, and potential improvement ideas and start from scratch in Mexico… because it's "cheaper."
An undetermined amount of jobs will be cut from Callaway Golf's Chicopee plant as the company begins it's shift to Mexico. An estimated 75 workers were laid off on Tuesday as Callaway begins it's 18 month restructuring process.
Callaway officials say the majority of North American manufacturing will now be done in Mexico. In 2008, closed its upstate New York plant. It's still unknown how many Chicopee workers will be laid off. Callaway says "manufacturing and distribution capabilities would be maintained throughout and beyond this restructuring period."
Well at least it's not across an ocean or two where you have some rather stunning supply chain risks. I was curious as to the labor content of a golf ball and a quick search on YouTube yielded a Made in America episode on a Titleist golf ball factory… coincidentally also in Massachusetts. Lots of machines, and a typical lean guy could quickly figure out how to remove a lot of the waste of transportation going on in that facility.
So what did Callaway gain? Lower labor cost on the people they probably use to move materials between machines, as well as develop, test, and ship product. What did Callaway lose? Dozens, perhaps hundreds, of people with many years of training and experience just aching to transform that knowledge into ideas for product and process improvement to add customer value. If someone would just be smart enough to ask.
But, alas, that opportunity doesn't really show up on a traditional accounting P&L or balance sheet. The greatest cost in business is not labor, material, or overhead – it's unnecessary complexity and unrealized improvement opportunities.
Companies making everything from low margin apparel to high margin technology products are realizing the value of ideas, short supply chains, close communication, short development cycles, being close to their customers, and the opportunity of focusing inward to improve. Others, like Callaway, still think only of the cost of the pair of hands without realizing there's a brain attached to those hands.
Are you stuck in ancient times thinking like Callaway? Perhaps you should attend the Lean Accounting Summit in Las Vegas next month to understand your true financial picture… and opportunity.