Why reshoring?

09/07/2012

I was at a client's subcontractor in Mexico. The room was the size of a basketball court. There were probably 10 huge rotating tables each with a dozen workers sitting at the various stations: cutting tubing to length, solvent-welding tubes to connectors, coiling the product, etc. You could get a contact high off the hexane in the air. I'd been told the job had been relocated from the States to take advantage of low wages.

Yup, Mexican labor, like most low-wage countries', gives significant savings over U.S. labor. This wasn't a problem if you could accept the high turnover rates (20%+), the hand-generated scrap, and the disappointing yield rates at the final test station. However, for a medical IV product, it somehow was profitable.

I'd finished my assignment and came back to the U.S. With my follow-up report and the subsequent phone calls I asked the "King-has-no-clothes" question: "Why are you in Mexico? Assuming the personnel problems and yield aren't part of the equation?" I then got the speech on using low-wage countries and would I be interested in helping relocate this operation to China? I answered his question with another one:

"Why not automate the whole thing and it can be located anywhere there's electricity?"
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