The Question of Outsourcing

Question:

It seems like everybody has an opinion regarding the outsourcing of manufacturing and engineering services to other countries. The practice of outsourcing has severely damaged the plating industry in the United States. Do you have any thoughts on how a modern plating shop can continue to compete in this environment? L. L.

Answer:

This is a good question that has finally become a "front and center"issue after a long period of denial by American manufacturers, politicians and citizens.

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The major driver for this outsourcing is cost. We all like inexpensive goods. Why pay $400 for an electronic gizmo when we can get it for $200 from an offshore manufacturer? There is nothing wrong with this but what will happen to our manufacturing and engineering base? How will Americans be able to pay for goods even at the low prices offered by offshore manufacturing if they do not have adequate jobs? It is estimated that this year, close to 600,000 jobs will be outsourced and by the year 2010 close to 1.6 million jobs will be offshore. These are real "scary" numbers!

I will be the first to admit that I do not have the solutions to this major, major problem but if I did, I would be an extremely highly paid consultant. I do, however, have a list of things that a plating shop owner should think about.

Add additional processes to the processes you already offer. Some examples:

• Anodizing
• Powder coating
• Chemical and physical vapor deposition
• Diffusion treatments
• Ion implantation
• Change your business model:
• Emphasize prototype work
• De-emphasize large runs with low margins
• Compete on quality not on price
• Charge for your expertise not for the number of square feet plated

Some additional things to consider:

• Form strategic alliances with companies that offer non-plating processes
• Improve the quality of your workforce with training programs
• Improve your quality control
• Reduce waste and rework

Last but not least, do not spend time:

• Whining about the sad state of affairs
• Competing on price alone
• Expecting government protection
• Waiting for the next "big thing"

I'm not sure I really gave you a good answer but I hope it gives you a few things to think about.