The Myth Of Chasing Cheap Labour

Online Editor

Jessica Stank explains why you should consider automation in your processing facility

Recent events shed a light on the potential downside to setting up manufacturing in other countries to cut labour costs, and the instability that can occur without established links in the labour force. More and more companies are looking at the long-term costs to these operations, rather than just the direct labour costs. The following are some of the other factors to consider in going offshore for cheap labour and why it might make sense to stay local and make the jump to fully automated equipment.

Consequences of cheap labour

One large factor to consider is the potential loss of intellectual property. This can include your product recipes as well as your manufacturing expertise. It is of course possible to sign non-compete clauses and other agreements to help alleviate this concern, but we all know that getting an agreement that lasts forever is not going to happen. If an agreement is broken, good luck with the litigation in another country. In the long run, you may well be setting up a global competitor.

Loss of control

Another factor to consider is the loss of control to your process and product. To make sure that your product is being manufactured to specification, you will need a trusted employee on-site. This may be a difficult position to fill. Employees from your home office with enough managerial experience are unlikely to want to uproot themselves. Employees with managerial experience in the destination country are likely already working for a competitor.

It will also be more difficult to control quality. The ingredients that are required for your product may be more difficult to locally source, or you may have to pay shipping costs to get the ingredients shipped to your remote plant.  If the logistics are not set up just right, you run the risk of significant delays in manufacturing as you wait for materials.

Language and culture gaps

The differences in language and culture can also play a role in product quality. These differences can make it more difficult to train employees in good manufacturing practices and quality control. Employees are eager to please and they may not want to admit that they do not understand instructions. This same tendency also makes it difficult to get answers if there is bad news. In some cultures, it is not proper to say ‘no’ to your boss. Because of this, you may not know about a production problem until it results in late deliveries.

Current events

A number of events can create delays in production and shipping, both for raw materials and for finished goods. Strikes, political unrest, weather events, and, as we’ve recently seen, widespread illness, can all bring the production or shipping processes to a halt. Although many of these events are beyond your control, familiarity with the local language, culture, news, laws and government can help you anticipate these events and plan accordingly.

Why it makes sense to consider automation

While the thought of cheap labour abroad may sound enticing, the variables that can stand in the way of efficiency and quality might make you want to reconsider. The cheap labour you can find offshore is often still using more manual methods for means of production. This can mean increases in safety issues, waste due to human error and product inconsistencies.

Fully automated processing equipment eliminates a lot of human involvement that can cause mistakes. It also provides accurate record keeping and lot tracking which is helpful when an issue arises.

Automation removes guesswork; it cuts down on work hazards brought on by exposure to chemicals or injury due to repetitive motion. It requires fewer staff members, which helps with labour costs. When using recipe automation you can expect a far more consistent product than you can get with a manual process. 

Whether you are going to manufacture domestically or offshore, the solution to all of these problems is to refine the manufacturing process with a high degree of automation.

Regardless of what country you are in, your competitors in that country will have the same fixed labour costs that you do. The automation system will always allow you to get virtually instantaneous information on your process and will greatly simplify your quality control procedures and record keeping. This type of system will also allow you to limit access to your intellectual property and make it easier to put procedures in place to keep it secure.  With automation, you can cut manufacturing costs domestically so you don’t have to go offshore and if you must go offshore, automation can help to address many of the problems that you could encounter.

Jessica Stank is with APEC

Recent Issues