Round Wood

[gator]

Just some assumptions and some very rough math:

Let's say one person can do 30 an hour (one every two minutes - loading the machine, automatic turning, unloading the machine). USA costs are $20/hr (wages, overhead, insurance, taxes, fringes, etc), Offshore costs are 25¢/hr = almost 66¢ difference each piece. Typical shipment of 200000 pieces = $132,000 difference in cost. $132K pays a lot of freight and profit.

Numbers may be off but the theory is good.

George

[jerrye]

Simple economics. Supply vs. demand.

I sell a product that originally was produced in US, then went to Mexico, now mostly produced in Asia. The percentage of Asian sourced product sold in US is 90%+. There are still producers in the US; how they survive I don't know. A customer recently told me he had a US producer quote him. The same bag he can source in Asia for ~$13, and can source in Mexico for ~$18, he was quoted ~$27 by the US maker. The reason? Cost. Labor? Mostly, combined with higher cost of doing business. We are so idiotic in our willingness to sue that liability insurance costs are now, according to what I hear, the highest cost of doing business in the US. That's a driving reason why doctors are getting out of practice. Yes, we've largely done it to ourselves. The cat's out of the bag now, so...?

[DavidF]

I think this sums it up really. US costs are just so high because we want the life style we have. Others are in the position where the costs are much cheaper. In fact, with the quantities involved the cost does not even need to be that much cheaper; a 100,000 of any saving is a lot of cash. Another example, a Chinese customer of ours said that they would buy a pick and place machine ($250,000) IF we we put a full time engineer on site for 12 months!!! We did just that, a fully trained GOOD guy for $60 a month, yes $60! we got the sale. Can you imagine trying to do that over here?

I am sure it will all come full circle as these emerging countries aspire to the good life and costs rise, it happened with Mexico and is happening in China, eventually there will be so few cheap manufacturing bases left that the work will come back. I hope!

[jerrye]

Originally Posted by DavidF

pick and place machine

David, are you in the packaging equipment business?

[DavidF]

Originally Posted by jerrye

David, are you in the packaging equipment business?

No, surface mount component assembly for the electronics Industry. And yep, they are all still threatening to outsource....