Reference pic: Dan Howard in Unsplash
I'm on a reading binge (sort of) and right now I just finished reading Making It In America by John Bassett and Ellis Henican. It's about a furniture manufacturing firm based in Virginia and North Carolina and what the firm did to stay in America rather than outsourcing production to China. Based upon my readings of history, it sounds like the largest concentration of furniture manufacturers were based in Virginia and North Carolina. Then around, 2000 or maybe 1999, furniture manufacturers started to outsource to China because the cost differential was too compelling.
" Labor costs in furniture manufacturing:
US = $ 14.24/hr
Mexico = $ 2.20/hr
China = $ .69/hr
Indonesia= $ .32/hr
Today, most of the production of furniture is done in China. Vaugh-Bassett was one of the few holdouts to remain in the US.
Please note, these figures were quoted back in 2001 so today the costs are probably different. But with such cost differential, no wonder the furniture manufacturing industry was basically annihilated. I tried to find data but was unsuccessful, but I imagine the furniture manufacturing industry is way smaller than it used to be, with only a handful of manufacturers and some niche artisanal type producers. According to the book, Vaugh-Bassett appears to have successfully held its ground.
The owner (?), John Bassett, provides 10 points to how to combat and overcome the outsourcing trend. They are:
- The power of a winning attitude
- The importance of treating people something more than numbers
- Transparent leadership
- Facing the tough decisions
- The willingness to change (again and again and again)
- The refusal to panic
- Communication, teamwork and why they fuel each other
- The need to keep investing in the future
- Making the best of the worst situations
- The huge impact of buying American.
From Making It In America, pp. xvi and xvii.
I might later go into details of some chapters, just to lock in my brain some of the important points he makes, but my main take away is to have faith in your people. For too long, companies have followed the Harvard MBA way and looked at people as a cost to reduce when they should be looking at people as assets. At least, that is how I read his book. Here's the section that I read that led me to that understanding:
"As a business leader, it seems to me we have to do something more than reduce labor costs, avoid taxes, produce as cheaply as possible, and maximize our margins regardless of the human costs. What kind of legacy is that? Running lean and earning profits are certainly important business aims, but they aren't the only goals great leaders have. We must owe something more to the country that has been so generous to us. As President Kennedy reminded us more than half a century ago, we also have to give. We have to produce valuable products. We have to create decent jobs. We have to support the communities we live and work in. We have to boost the nation's economy, lift the tide for everyone, and willing pay our fair share. You don't hear so much about that anymore from today's bottom-line consultants and business school experts. But those are the values that made America a great place to live and gave us the strongest economy the world has ever seen." From Making It In America, pp. xix and xx.
John Bassett hits upon so much that is wrong today: the tax avoidance, the lack of decent jobs, the constant fixation on reducing costs, especially labor, MBA's lack of empathy and forgetting to realize that their success is due to America's generosity in providing resources.
And this is why the Midwest and the south has voted in for change. Whether they made the right choice remains to be seen.
The book deals with how to deal with outsourcing trend. Unfortunately, I'm not sure how they apply to automation. I think the points still apply but the work will be much harder. I think we would have to upend our cultural values which right now places shareholder values, first and as the only thing that businesses should be concerned about. Someone would have to come up with a credible theory to replace Milton Friedman's dictum that the business's sole purpose is to make money for the shareholders (only - I added in that piece).
Other post related to this book:
Rule 5 in Making It in America: Don't Panic [BTW, I don't know why I can no longer add the picture to along with the link.]