What Kind Of Work Is Resistant To International Outsourcing?

I subcontract machining work to suppliers around the world, but many of my subcontract jobs are better suited to a U.S. supplier. Lately, these jobs have presented a challenge. A customer recently asked me to find a shop to make parts needed within a 2-week leadtime. I started calling my friends at U.S. job shops, only to find that most of them were now far too busy to run a job that quickly.

And yet, even if business is picking up, the competition from international outsourcing is a reality that will continue to affect U.S. shops. While it makes sense to send certain jobs to countries with lower labor costs, there are other jobs for which it does not make sense to send the work so far away. A U.S. shop should invest its money and its time to develop the capabilities for taking on this latter type of work.

Based on my experience, these are the jobs that fit the two categories:

Work That Is Easy To Outsource Internationally

• Long production runs for which every penny of cost is important.
• Short production runs for which the engineering and setup costs are high, such as injection molds and assembly fixtures.
• Cast iron and mild steel parts.
• Plastic parts.
• Close-tolerance parts that can be ground.
• Parts that are manually machined, machined with conventional machine tools or machined with "basic" CNC machines.

Work That Is Difficult To Outsource Internationally

• Complex parts that require milling and turning. (Example: parts that could be bar-fed on a multitasking lathe.)
• Heavy parts, when the lead time is short and the airfare would make the cost unreasonable.
• Sporadic runs with short leadtimes, where the production schedule cannot be reasonably predicted.
• JIT runs, when the supplier is responsible for maintaining stocking levels.
• Parts made from exotic materials such as special aircraft alloys.
• High duty rate parts (such as bearings).
• Development parts, where the design is not stable and frequent communication is required.
• Short runs in which surface finish and aesthetic appeal are important.

These are only guidelines. Exceptions occur all the time. For example, if an otherwise successful U.S. shop has excess capacity ready and waiting, and the shop can run a job with no increase in labor or capital equipment, then that shop can run the job for less than any international supplier.

Also, if the quality and the machining process for a critical part need to be closely overseen, it makes sense to machine that part in the United States.

A final point relates to people. I believe there is nothing more important than building long-term relationships between customers and suppliers. A strong relationship can beat a low bid. As long as the costs are reasonable, most companies will choose to do business with the sources they know and trust. n

About the author: Kenneth Harrison is the founder of Tooling4Less.com (Fair Oaks, California), a company that manages the outsourcing of machining, assembly and finishing.