by Desmond Elliott  

Outsourced Engineering, Fabrication and Manufacture is standard practice across Australia. A recent report suggests the mining industry is beginning to re-evaluate the real cost, the savings are not adding up. Reports from purchasing officers have disclosed some alarming facts – product failure, incomplete products, failed surface coatings, poor workmanship, rework adds a high cost to outsourced manufacture and fabrication. According to secret reports rework on outsourced products adds up to 40% to cost, the real product cost is higher than a locally made product. The price of low cost outsourcing is satisfying accountants, but does not translate into savings for the project.

We seldom hear what this real cost of outsourcing is. Unfortunately, management and accountants only see the price quoted by the supplier. The real costs of the products are hidden in the project. We see downward pressure on wages to compensate for these failures, the cost of employing Australians to fix cheap products is unnecessarily high and avoidable. Australian workers cost too much. Wrong! The cost of reworking poor quality products is much higher than sourcing a quality product from the outset. If the mining companies (big business) examined the real cost of doing business with the cheap outsourcing countries their choices would be different. Buying locally made Australian quality is where the real cost savings are, the cost savings in getting it right the first time, surpass any savings on outsourced products produced by slaves in the developing countries.

The press is cluttered with chatter from the mining industry seeking access to cheap labour from Asia to bolster the tradesman pool. No! They seek cheap labour to fix the failures resultant of the cheap products they source from sweat shops overseas. You get what you pay for, this phenomena has been with us for centuries and will continue. These companies are very short sighted indeed.  The governments response is for a quick fix. Come on down, and bring your family with you. Too bad we lower the standard of living for Australians in the process, too bad we need cheap labour and now!

The clever country is no longer of interest to government or industry. We are seeing people traded as a commodities, the reaction should be to invest in apprenticeships for Australians. Since the early 1980’s successive Labor governments shepherded students toward a university education whether there are jobs at the other end or not. To counter the effects of Free Trade we removed the opportunities for apprenticeships in the trades. Our status as a high tech, clever country has been discounted to a point where we have a mass of people with university qualifications to fill the top 20% of jobs and no capacity to supply tradesmen.

When governments realise that only 20% of our school leavers should be heading for university the quicker we turn around the lost ship. Dumbing down high school courses and university degrees to suit the needs of students is counter productive and stupidity. The high standards set for entrance examinations have a purpose. Sifting the students to find those with the drive and intelligence to fill the top positions should be in our universities, not to reduce the quality of education to suit the average student. Universities are institutions of higher learning and should remain so.

There is total agreement of the need for higher levels of training to meet the demand of higher technology at trades level. This would be better managed by adding the appropriate courses to the trade as part of the academic training within the apprenticeship. A one year course after the basic trade is taught, then back to the tools to hone the skills before entering the world as a solo performer. This increases the relevance of the theory to the trade and keeps the tradesmen out of our universities.

While re-evaluating the failed outsourcing system, there is a solution. Mining companies and governments should promote and insist on partnerships between foreign manufactures and Australian high tech companies to provide quality control inspectors for Asian factories. The Chinese especially, are reluctant to spend money employing quality engineers to manage quality control. If efforts were made to correct this problem the cost of failure would be reduced to a fraction or eliminated. The mining companies could afford Australian tradesmen, at Australian rates of pay and this would eliminate the need for the slave labour they seek from developing countries.

This solution may not be the complete answer but is a step in the right direction. Working smarter removing the need for slave labour.

 

Please note: The views and opinions expressed above are those of the contributor and do not necessarily reflect those of the publisher; www.theissue.com.au