I recall some talk of the US losing, by degrees, machine tool and manufacturing competency along with offshored manufacturing jobs.
Does this story provide evidence for that assertion?
DRM
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Small Firms Outsource Abroad By Tapping Offshore Producers
By TIMOTHY AEPPEL Staff Reporter of THE WALL STREET JOURNAL
Moving manufacturing offshore, long a strategy of large multinational companies, also is being adopted by smaller companies, which typically use a different approach to cut costs.
Rather than setting up production facilities, as larger multinational companies often do, smaller businesses are forging close supplier relationships and partnerships with overseas producers, who have excess capacity and are making huge strides in boosting quality and indigenous management skills. Such an approach allows the smaller companies to move faster and avoid the hassle and cost of new construction or start-up. Another appeal: Overseas producers often have newer plants than the U.S., stuffed with the latest machines.
A major thrust is occurring among auto-parts suppliers, although makers of various goods from fishing reels to dental tools are likewise outsourcing overseas, says Craig Thornton of Plante & Moran PLLC, a U.S. accounting and consulting firm with many small manufacturing clients. Big customers have given many of them an ultimatum: If they don't have an offshore operation within the six to 12 months, they will lose business to competing producers who do, Mr. Thornton said.
Big hurdles remain. Operating with only a thin layer of top managers, smaller companies in the U.S. often find that going overseas can be a distraction resulting in missed opportunities or mistakes at home. Many owners are wary of outside advisers and consultants, whom they view as more expensive and less reliable than inside managers or family members.
Wayne Youngers had little choice. About 18 months ago, his customer said Mr. Youngers's small $6 shaft used in hydraulic machines could be bought in China, at comparable quality, for $2 or less. Mr. Youngers, chief executive of Youngers & Sons Manufacturing Co. in Viola, Kansas, now is reviewing his entire product line to see which items can be made in China, and figures eventually 50% of them can be made overseas. "We suddenly realized our only alternative was going out of business or being significantly smaller [in the U.S.] than we were," he says. DOW JONES REPRINTSThis copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit: www.djreprints.com. • See a sample reprint in PDF format • Order a reprint of this article now.
Mr. Youngers works with a Chinese engineering firm that has established relationships with factories in China. Indeed, facilitating the move, for him and others, is the growth of intermediaries who pack U.S. manufacturing trade shows hawking their services as overseas production partners.
Moreover, communications technology that tracks production and shipments from distant plants helps to allay concerns of closely held companies, which are accustomed to hands-on management and can't afford to have a single shipment delayed or rerouted.
These factors make it easier for "small firms to get into outsourcing, not just in China, but in South America and Mexico," says William Dunkelberg, chief economist at the National Federation of Independent Business. "The Chinese have developed skillful managers and they have the latest equipment, often better than we have."
Trade groups and others working with small producers don't have any estimates of how many small companies are outsourcing, but they say the activity is increasing fast. In October, the Precision Machined Products Association, which represents mostly small metal-parts makers, took 52 members to visit seven factories in Shanghai and Beijing.
Source -
http://online.wsj.com/article_print/0,,SB107342876260431500,00.html