Tough ideas about the U.S. economy and American workers from the Boston Consulting Group:
A report by an influential consulting firm is exhorting U.S. companies to speed up "offshoring" operations to China and India, including high-powered functions such as research and development.Posted by Alan at July 3, 2004 09:07 AMIn blunt terms, the report by the Boston Consulting Group warns American firms that they risk extinction if they hesitate in shifting facilities to countries with low costs. That is partly because the potential savings are so vast, but the report also cites a view among U.S. executives that the quality of American workers is deteriorating.
"The largest competitive advantage will lie with those companies that move soonest," the report states. "Companies that wait will be caught in a vicious cycle of uncompetitive costs, lost business, underutilized capacity, and the irreversible destruction of value."
Boston Consulting, which counts among its clients many of the biggest corporations in the United States, admonishes them that they have been too reluctant rather than too eager to outsource production to "LCC's," or low-cost countries.
"Successful companies ask themselves, 'What must I keep at home?' rather than 'What can I shift to LCC's?'" states the report. "Their question is not 'Why outsource to LCC's?' but 'Why not?' "
Particularly troubling is the report's information about confidential discussions with executives at Boston Consulting's client companies, many of whom conveyed low opinions of their American employees compared with labor available abroad. Not only are factory workers in low-cost countries much cheaper -- well below $1 per hour in China, compared with $15 to $30 per hour in the United States and Europe -- but they quickly achieve quality levels that are "equivalent to or even higher than . . . [the] best plants in the West," according to the report.
"More than 40 percent of the companies we talked with expressed significant concerns about the erosion of skills in the work force," the report states. "They cited machine operators who are unable to handle specialized equipment properly or to make the transition to new work materials. In contrast, LCC's provide large pools of skilled workers who are eager to apply their 'craftsman' talents."
Midlevel engineers in low-cost countries, the report adds, "tend to be more motivated than midlevel engineers in the West."