Recycled - Today's Machining World

outsourcing
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burned. Toymaker Mattel had worked with its supplier good location just outside of Shanghai to open their own
for 15 years and had many costly checkpoints in place factory in 2001, Miller asked the man to run it.
before this summer’s recall.
“We were really lucky to have someone who knew the
“If the big players with very big pockets get into
country. He still has family there and still has connec-
trouble, what does that mean for smaller companies tions. He watches over everything,” he said.
who can’t afford trouble?” said Shankar “It’s all far more W.L. Scheller, professor of industrial and manufactur-
complicated than people think.”
ing engineering at Kettering University in Flint, Mich.,
Dan Harris, a Mandarin-speaking attorney in the agreed that having a trusted person on the ground in
Seattle law firm of Harris & Moure, said horror stories
are legion. Harris has helped hundreds of
businesses form Chinese ventures; he’s also
helped many companies clean up from the
missteps they made going it alone.
“The biggest mistake [outsourcers] make
is thinking it will be easy and they can do it
just like someone else did it. Other mistakes
include not accounting for hidden costs
and believing the Chinese manufacturer is
their friend,” he said. Harris tells stories of
businesses that found manufacturers on the
Internet, had brief e-mail exchanges with
them and then just shipped over designs and
money. Those stories, as you can imagine,
don’t end well.
China shouldn’t be considered a luxury.
“They want it to work so badly, they don’t
think things through. It isn’t like doing
a deal with a guy down the street you’ve
Photo courtesy of nakedcapitalism.com.
known for years,” he said.
“Anybody who isn’t over there babysitting their proj-
Cousin thinks of his company as a risk management ects is asking for some big problems,” he said. “You don’t
firm for those interested in, but afraid of, plunging into want to cede control to someone else.”
China. One of Cousin’s guiding principles is to keep
Watching your own operations closely isn’t enough.
intricate jobs in the United States at one of his four U.S. China is undergoing enormous demographic, economic
facilities. Simpler, mass-manufacturing projects are sent and social changes – the hallmarks of any emerging
abroad. Because labor cost is by far the largest advantage market. But these changes are happening to the largest
of China, outsourcing highly specialized work doesn’t country on Earth and in the relatively new age of instant
make sense on any level, he said.
communication. They’re huge, historic and happening at
Also, Cousin advises companies check the back-
an unprecedented pace. You’d be advised to do more than
grounds carefully of every partner they consider. He said read your local paper, experts say.
he’s looked at several hundred companies, used 50 of
Over the summer, the global business world buzzed
them and considers only half of those to be core partners. with the news that the Chinese government was doing
The answer to the China question for Miller of Prince away with preferential income tax treatment for for-
Industries was under his nose – or at least across his eign companies. It took the measure to help cool off an
desk. A Chinese-born man, whose work for a competi- economy they fear is overheating. It also vowed to aim
tor Miller admired, decided to form his own consulting its efforts at attracting more high-tech and service-based
company. Miller asked him to travel to China to assess businesses and fewer simple manufacturers.
Prince’s possibilities for outsourcing. When they found a But attorney Harris believes these will have negligible
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