Sharp Rubber Duck

Made in the USA? Made in India? Take your pick

August 12, 2006

By Christopher Conkey WSJ

In the beginning, there was “Made in the USA.” Then came “Made in China” and “Made in India.” Now comes a different twist: “Made in the USA, China or India. You choose.”

Pacific Plastics & Engineering, a privately held Soquel maker of specialized devices for medical companies, lets customers decide whether to have their product made in California, or – for at least 25 percent less – at plants in India or Taiwan. “We give our customers a choice,” Chief Executive Officer Stephanie Harkness says. “We don't ever pull the wool over their eyes.”

Other medical-device makers are offering the same option, the latest manifestation of a trend that has been unfolding over the years as more manufacturing moves abroad. United Plastics Group, Oak Brook, Ill., and the Tech Group division of West Pharmaceutical Services, Lionville, Pa., also offer customers a choice between costlier domestic products and less expensive ones made overseas. “It used to be a rare service 10 years ago,” says Tom Podesta, vice president of sales and marketing for Tech Group. Podesta says between 15 percent and 25 percent of his customers opt to have items produced at Tech Group plants in Latin America; the rest choose from its plants in the United States. At least four of his firm's competitors offer their customers a similar choice, he says. “It's absolutely what customers want,” says Richard Harris, chief executive of United Plastics.

Contract manufacturers produce goods designed by other companies – some that specialize in automotive and electronic parts offer similar choices to their customers. And, of course, big companies with global networks of their own routinely move production around. Companies that buy parts from other companies can compare prices from domestic and foreign suppliers and pick one over the other.

Most companies giving customers explicit choices about manufacturing locations are businesses selling to other businesses, although at least one consumer company does something similar. Online lender E-Loan gives consumers the option of having mortgage applications processed faster if they have it reviewed by workers in India. The company says roughly 80 percent to 85 percent of customers choose the Indian option, which saves E-Loan money on labor costs. Some companies that deal directly with consumers quietly outsource back-office work; E-Loan says offering this choice is part of its strategy to build trust and loyalty with consumers.

Specialty medical-device makers are hypersensitive to quality, regulatory and intellectual property concerns, all of which can restrain the urge to source from overseas. But the lure of low-cost overseas labor has become irresistible. “The headline is that medical customers are starting to get into low-cost regions,” says Harris of United Plastic. “I think it's inevitable.”

PP&E, founded in 1989 with exclusively domestic operations, works closely with clients ranging from start-ups to medical-device heavyweights like Boston Scientific Corp. to turn new designs into plastic parts and finished products. (PP&E is not related to Pacific Plastics, a San Diego-based company). Under pressure to reduce costs, the company started offering overseas-production options in 2001.

“Initially, companies moved forward with a lot of trepidation,” says Tom Star, sales manager for PP&E. It took time for companies to grow confident that the overseas facilities, which PP&E contracts with but doesn't own, could meet exacting specifications for medical products, he says. Now 70 percent of PP&E customers opt for production in India or Taiwan. “It's only going to become a greater percentage of the work we do,” Star says.

PP&E, which has 110 employees in the United States and 175 overseas, broaches the manufacturing issue during the ordering phase, verbally asking a customer if it is interested in “offshore pricing.” If cost is the big issue, a PP&E sales manager recommends India, where lower costs on resins and labor can lead to savings of 25 percent to 40 percent, even after the cost of shipping. If a company is more concerned with speedy delivery, PP&E recommends Taiwan, where a tooling shop operates 24 hours a day, versus just 12 hours at the company's other locations.

Some customers are willing to pay more to produce in California so “they can see their baby being born up close,” or manage unexpected developments, Harkness says.

Editorial:

Now, the real question is why is there any question at all?

As Americans each and every product and service should be sourced here at home, not just following the lowest price of the day. Outsourcing to foreign countries is simply short sighted. Just as Walmart buying foreign over American holds their price down, It also forces yours, mine and everyone else's purchasing power DOWN.

Ask yourself, is being unemployed or almost as bad, underpaid really of benefit to you or just to the corporations and their FEW Stockholders>

Sad to say, our Government, and Corporate America is SELLING US ALL DOWN THE RIVER for a few worthless beads.

Speak-UP, Buy American, Hire American Citizens. Stop giving America away to the lowest bidder. They will stab us in the back when it pays better.

Editorial by Sharp Rubber Duck

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