If you work in the electronics industry, you are most likely aware of the tragedies at the Foxconn facility in China that occured recently.
I have been mulling this topic over for the past couple days and wondering the best way to address it in the blog. If you Google the subject I am sure you could find a couple hundred blog posts on the subject all with different viewpoints. I would like to approach it from an Engineering perspective, a PC Systems perspective, then also a personal spin at the end.
First, as Engineers, we must always be cognizant of cost. Design is critical, but if you can’t provide a product cost that will win the bid, your effort is wasted. This often leads us to offshore pricing for simple products to take advantage of the low labor costs.
We will save the topic of actual cost of offshoring which takes cost of quality, support, freight etc. vs. unit price for another day.
Often times are hands are forced into populating our designs with an offshored component. If we don’t do it, our competitor will, and we will likely lose the bid. A tremendous amount of time can be wasted this way. I am not quite sure what the solution is, but we definitely have a problem. Every Engineer who has sat through an ethics class has to be reeling from the news at the Foxconn facility. Also, we must also recognize that we can’t claim ignorance to the topic, as we were all well aware of the terrible labor conditions in the low cost regions such as China, India, and Eastern Europe. I am not sure of the solution, but it is a problem that weighs very heavily on me.
From a PC Systems perspective, we discuss and debate offshore sourcing on a daily basis. This discussion usually is focused on pricing, leadtime and quality. Many people will associate poor quality with products from China, but we do not find that true with many products, assuming you do due diligence in selecting and qualifying a supplier.
As a company, with regards to our more mature product lines, we are typically very competitive on cost. We reside in a very low base cost region where cost of living does not dictate a high wage for anyone from the janitor to the CEO. Also, we watch our labor costs very closely so that we may compete with offshore competitors, particularly on larger/heavier items that are expensive to ship. There are many reports that the recent salary hikes at Foxconn will have a ripple effect across the industry. Ultimately, workers will demand an improved quality of life, with consequences yet to be seen. Here is a link regarding the effect in Taiwan:
The effect of this will likely be an increasing cost for all product because of transferred cost to the customer and also salary hikes at other companies to retain a competitive wage. I personally feel this will help PC Systems in the long run, because of our low content of offshore components and also it will allow us to be more competitive due to our already lower base cost. This is yet to be seen as well.
Finally, from a personal perspective, we really must ask ourselves “Is it really worth it?” when we are looking at purchasing new products. This is most important from a personal perspective because I feel the only way to improve the conditions in LCRs is to stop demanding the lowest price possible on goods, particularly on electronic components such as cell phones, laptops, etc. I am a strong proponent of free markets, and often stand in stores such as Wal-Mart and pick the product that saves me $0.05, blindly assuming that the suppliers are being ethical and the variability in price is due to accepting of a lower profit. They have said ignorance is bliss, and I feel this isn’t a decision I will be able to make as easily from now on. Supply will always follow demand. If we demand the lowest possible price, there will be suppliers who find the cheaper ways to manufacture product without regards to the effect on society.
In the end, we have to ask ourselves, is it really worth saving a nickel if it means abhorrent labor conditions for the workers producing the part? I know there isn’t a simple answer, but it should be a question we are all considering.
Understanding this is a very touchy subject, I would like to know your thoughts. Have the recent events changed the way you are buying products? What do you think the effects of the salary hikes will be on your business?