OUT-SOURCING: WHO IS THE BAD GUY?
Recently I spent ten wonderful days in the Virgin Islands. I am a rough diamond gemologist hired by a major jewelry company in the Virgin Islands to source rough diamonds for them in Africa. This article is not about gemological consulting or even about the jewelry industry. I am writing this article to bring attention to a contentious issue literally affecting everyone in America. This article is about out-sourcing.
The competitive challenges facing my client are being played out in many industries and in many companies throughout America. The company that engaged my gemological consulting company has witnessed an enormous erosion of their margins through increased and ruthless competition, coupled with the ever escalating costs of increasing taxes, wages and benefits. In addition, he is plagued with constant increases in his fixed and unfixed overhead.
Today, this scenario is a very common occurrence in the American business world. Wise companies anticipate the future and address these issues before they become issues. They act in accordance with the time, the place and mentality of their company culture and respond in positive, proactive ways. These companies will most likely survive.
In the ancient world, there was a torture called; “Death by a thousand cuts.” Over a period of time, the torturer would inflict tiny cuts on his victim. The victim would very slowly and very painfully die from the thousand small cuts. Initially, the victim could laugh off the small wounds and act with bravado. Soon however, he would realize the seriousness of his situation and fear and panic would set in. Of course, at this point, his fate was in the hands of the torturer who could kill him or extract whatever ransom he wanted. This is the state of the American business man today.
Most businesses today react and do not act. They deny their situation and put on a brave front. The truth is many do not realize they are being cut a thousand times because management is so focused on the coming quarter they cannot see the blood on the ground. Our politicians have no plan, this is obvious. Our business leaders, for the most part are short term thinkers. Our competition is ruthless and our situation in the world market is tenuous.
The jewelry company that hired me finally came to understand that they must act courageously if they are to stay in business. They have closed underperforming stores, streamlined management and are now going to out-source much of their jewelry manufacturing and some of their management. In the future all their printing, displays, accessory products, diamond cutting, certificates for diamonds and anything else that can be done or bought cheaper will be done in India saving them millions of dollars per year. If they want to stay in business, they have no choice.
It is just a hard cold fact. India has an educated population, a growing middle class, with an entrepreneurial mentality and labor costs far below America’s. Today companies have to do whatever it takes to survive. This means that good, hard working, loyal American employees are going to lose their jobs. Is the company the bad guy? Are the Indians and the Chinese the bad guys? Are we the bad guys? There are no bad guys, reality is what it is. The question is not who are the bad guys; the question is who will live and who will die. Out-source and your company survives and many Americans keep their jobs. Pay too much in overhead and do nothing about your margins and the whole company goes out of business and no one has a job. As a Clint Eastwood title once proclaimed, there is the good, the bad and the ugly. The truth is good, but it is often unpleasant and ugly.
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