Here’s an interesting paragraph I ran across in my recent reading ramblings:
“For instance, it was assumed that assembly labor was the significant, intractable piece of the pie, one that could easily be transplanted to foreign shores at great savings. Actually, that category of labor averages closer to 4-5 percent of product cost. Finished materials consume roughly 70 percent and overhead another 24-25 percent.
Piece parts were the very tip of the iceberg that somehow went to bid and largely decided overseas deals. This left behind fixed assets in plants, the same management overhead, increased travel, new customs fees, and greater outlays for logistics. Insufficient quality and time-to-market penalties were the other giants hiding under the waterline of standard accounting. Rarely were these factors assessed and attached to the part or assembly of parts under bid.”
via How An Old Analysis Technique Could Strengthen The U.S. Manufacturing Revival – Forbes.
I think this is a nicer way of saying:
“Much off-shoring was undertaken by managers who didn’t know what the hell they were doing.”
Recently , he was onto something that I actually took notes on. He used an illustration: Let’s say one guy knows how to make chocolate and sell it and does a great job at it. Another guy knows how to make peanut butter and he does a great job, too. Then there’s a third person…this guy doesn’t make anything but he has this idea as to how the chocolate and the peanut butter can be combined to make a product that nobody ever saw before and that everyone will love. Which of the three stands to add the most value to shareholders, to the employees of the two companies, to society? Why it’s that guy with the idea, right? My friend referred to this as the idea that provides 