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> Also, that sentence shifts from cost per hour to cost per pair without an explanation. Is 1 pair/worker/hour a realistic estimate? I did some work with manuf

> Also, that sentence shifts from cost per hour to cost per pair without an explanation. Is 1 pair/worker/hour a realistic estimate? I did some work with manufacturers who were in the process of moving manufacturing overseas some years ago. From my experience, the way the article presents the issue is detached from what really happens. For instance, people look at a labor difference of $3 and $12, and assume that if these things were manufactured in the U.S. they would cost five times as much. But the thing is, labor is just one part of the cost. You also have things like R&D, advertising, raw materials, transportation, machinery, the cost of the manufacturing plant, etc. Some of those (like advertising) are going to stay the same no matter where you make your product, some would probably cost less overseas (real estate needed for factories), some would cost more overseas (transportation cost). There are also other issues that come up (like quality control issues) that come up when moving operations overseas that can be quite costly. Here's the thing, though - let's say that a manufacturer makes a product for $10 and sells it for $12.50 - they're making $2.50 per unit sold. Now let's say that moving things overseas, when everything is taken into consideration, they can now make a product for $9.50, of which they keep 25 cents and pass the remainder 25 cents forward. Now they've increased their profit 10%, which is pretty big for them. But what about the consumer? For simplicity, let's say that the 25 cents goes directly to them and the middlemen don't take a cut. And let's say that the final retail price doubles (the results would be even more extreme if they quadrupled like the article says). So the price goes down from $25.00 to $24.75 - they save 1%. Now, obviously things are a lot more complex, and things are going to vary greatly depending on what's being manufactured. But from my experience, moving manufacturing overseas can often be profitable for companies while being only negligibly beneficial - or even detrimental (for instance, with poorer quality control) - for the consumers.

joe_the_user 5y ago
Just guessing, would another factor be that these are highly capitalized, highly leveraged, highly competitive industries, so a 10% increase in profits can multiply and where anything that increases costs must avoided at all costs because your competitors are lowering their cost constantly. Edit: I think we can see huge companies tightly locked into their paradigm because it involves so much capital and so many connections to suppliers etc.
jiggawatts 5y ago
I'm not an economist, but you touched on an observation that I've made that I can't quite articulate using the appropriate technical terminology: When products are not fully vertically integrated, and there's a large markup dowstream, the upstream manufacturing is highly incentivesed to "penny pinch" in a way that would be perceived to be highly counter-productive in an integrated organisation. The example that first made me notice this was power management in server systems. If you're running $100K worth DBMS software (licenses) on a $100K box, all of which has a further $10-100M of web apps and systems relying on it, then it would be madness to throttle that CPU to save $50 in electricity annually, right? Well, guess what: most places do this! It happens because they outsource the low-margin upstream component (colocation/hosting/cloud), and when you're a data centre provider living on thin margins, the cost of power / cooling can be very substantial relative to your own costs. If you rent the rack space for that server out for $500 per annum, that $50 of electricity is 10% more in your pocket! That's a big deal! Meanwhile, that $50 saved has slowed down $100M worth of stuff, sometimes by 50% or more. But... that's not the hosting provider's problem. (PS: Azure does this, and they don't let you turn it off.)
- MaxBarraclough 5y ago
  > that $50 saved has slowed down $100M worth of stuff, sometimes by 50% or more. But... that's not the hosting provider's problem Provided their clients don't figure out what's going on and move to another provider. If the client has millions of dollars riding on that infrastructure, they'd likely be doing enough performance-monitoring to notice this kind of thing, no? > Azure does this, and they don't let you turn it off Azure really don't offer any never-throttled instances? What about their dedicated hosts?
  - jiggawatts 5y ago
    > Provided their clients don't figure out what's going on I'm always pleasantly surprised when I see power management correctly configured at a client precisely because it is so rarely done correctly. Even if cloud vendors do fix this one thing, there's about a dozen more such issues where the suppliers' interests don't line up with the downstream consumers' interests. > Azure really don't offer any never-throttled instances? What about their dedicated hosts? I don't believe so. For example, their highest performing single node is the HBv3, with 2x AMD EPYC 7V13 processors for a total of 120 cores / 240 threads. On this page: https://docs.microsoft.com/en-us/azure/virtual-machines/workloads/hpc/hbv3-series-overview https://docs.microsoft.com/en-us/azure/virtual-machines/work... There is a box that says: Nodes per Socket (NPS) = 2 L3 as NUMA = Disabled NUMA domains within VM OS = 4 C-states = Enabled The technical name for CPU power management is called "C-states". In other words, they've left it on the default (enabled) on a machine that they charge $40K/year for!
xmprt 5y ago
It's not obvious that transportation and quality assurance are cheaper overseas. At this point, China has grown its manufacturing sector so much that it's potentially better than the US in many ways (as far as QA goes). And for transportation, economies of scale mean that it's potentially cheaper to ship a massive container of good to a common port instead of having to hire trucks for each of your factories. I'm not saying that either of these claims are true, but it's not clear that they are false either.
- kennywinker 5y ago
  The shoes are not all consumed in LA or whatever port city they land in. They go on trucks from there to all the smaller cities. Unless for some reason you need to have many factories spread out to produce what was made in one factory in china (seems unlikely, but for some product this will be true) you have the same shipping logistics except for the big container trip from china and the trip from the port to your distribution center.
  - sjwalter 5y ago
    There's a certain large detail elided by this, which is basically the experience of opening up a container from China. When you're doing any kind of non-trivial amount of manufacturing in China, you've got a chain of exporters and workers behind you that specialize in making the un-containering experience fantastic. As in, the standees of celebrity endorsers holding the shoe in their hand for the merchandising station are manufactured right across the street from where the shoe is actually made. The box company making the box are very close by as well. And then even the guys loading up the cargo are making it so it can basically go onto a container in China, go to a warehouse in LA, and be shipped over to Helena, MT, and have six or seven large cardboard containers all slide out of a twenty-footer, then the truck driver is on to the next shoe store. ALL that labour of packaging and boxing and merchandising all happens at basically starvation wages for poor Chinese. It's not JUST making the shoes, it's making the shoes, making the boxes for the shoes, making the merchandising for the shoes, and packaging all that shit together in a container-friendly way that is also friendly to unboxing by American minimum-wage workers. The "supply chain" is about much more than just the contents of the box, but about the entire chain it takes to get to retail.
dehrmann 5y ago
> moving manufacturing overseas can often be profitable for companies For a while, but your competitors will do the same, and unless there's a cartel, one of them will pass all the savings on to consumers, and the rest will follow.
serial_dev 5y ago
I had experience at a company (Germany) where we got smart home products built (electronics). Getting them from China was not only cheaper but (to my surprise) faster and better. They got knowledgeable QA people that understood how EU countries need different tweaks, and they got anything we needed done quickly. Shipping was fast enough, and all in all, they just provided a much better and more affordable product than any country in the EU could have done. It might be different for products that are very innovative, (most shoes aren't), but in that case maybe you can travel to China for a month and iterate quickly with the factory people.
- OJFord 5y ago
  I don't think it's about innovativeness - because I would say the reverse about shoes, the best are (resp. were) made in Northampton (England), and quality suffers if moved to China. But if you want plastic trainers, no doubt they make the best. I think it's just a simple case of doing a lot of it, specialising, getting good at it, as it would be anywhere. China now has more PCB fab know-how, equipment, people, etc. than anywhere.
  - Tsiklon 5y ago
    There’s a lot of great shoes still made in Northampton and the surrounding area NPS/Solovair (if you like the Doc Martens aesthetic) and Crown Northampton (if you prefer a sneaker or dress shoe) both brands are well regarded. But alas neither are inexpensive.
  - tweetle_beetle 5y ago
    I think the innovation too has been outsourced to China, even in fashion. Western brands have been reduced to just specifying what is already available for the most part. It isn't really possible to innovate when you don't own your factories and IP is poorly protected. The simple case of just doing it eventually applies to quality too - many high fashion brands like Burberry have discretely abandoned european manufacturing.
baybal2 5y ago
I really doubt you can still hire $3 per hour labour in China anywhere. $11-$14 per hour skilled assembly line work is nothing rare these days in China near big cities.

joe_the_user 5y ago

Just guessing, would another factor be that these are highly capitalized, highly leveraged, highly competitive industries, so a 10% increase in profits can multiply and where anything that increases costs must avoided at all costs because your competitors are lowering their cost constantly. Edit: I think we can see huge companies tightly locked into their paradigm because it involves so much capital and so many connections to suppliers etc.

jiggawatts 5y ago

I'm not an economist, but you touched on an observation that I've made that I can't quite articulate using the appropriate technical terminology: When products are not fully vertically integrated, and there's a large markup dowstream, the upstream manufacturing is highly incentivesed to "penny pinch" in a way that would be perceived to be highly counter-productive in an integrated organisation. The example that first made me notice this was power management in server systems. If you're running $100K worth DBMS software (licenses) on a $100K box, all of which has a further $10-100M of web apps and systems relying on it, then it would be madness to throttle that CPU to save $50 in electricity annually, right? Well, guess what: most places do this! It happens because they outsource the low-margin upstream component (colocation/hosting/cloud), and when you're a data centre provider living on thin margins, the cost of power / cooling can be very substantial relative to your own costs. If you rent the rack space for that server out for $500 per annum, that $50 of electricity is 10% more in your pocket! That's a big deal! Meanwhile, that $50 saved has slowed down $100M worth of stuff, sometimes by 50% or more. But... that's not the hosting provider's problem. (PS: Azure does this, and they don't let you turn it off.)

MaxBarraclough 5y ago
> that $50 saved has slowed down $100M worth of stuff, sometimes by 50% or more. But... that's not the hosting provider's problem Provided their clients don't figure out what's going on and move to another provider. If the client has millions of dollars riding on that infrastructure, they'd likely be doing enough performance-monitoring to notice this kind of thing, no? > Azure does this, and they don't let you turn it off Azure really don't offer any never-throttled instances? What about their dedicated hosts?
- jiggawatts 5y ago
  > Provided their clients don't figure out what's going on I'm always pleasantly surprised when I see power management correctly configured at a client precisely because it is so rarely done correctly. Even if cloud vendors do fix this one thing, there's about a dozen more such issues where the suppliers' interests don't line up with the downstream consumers' interests. > Azure really don't offer any never-throttled instances? What about their dedicated hosts? I don't believe so. For example, their highest performing single node is the HBv3, with 2x AMD EPYC 7V13 processors for a total of 120 cores / 240 threads. On this page: https://docs.microsoft.com/en-us/azure/virtual-machines/workloads/hpc/hbv3-series-overview https://docs.microsoft.com/en-us/azure/virtual-machines/work... There is a box that says: Nodes per Socket (NPS) = 2 L3 as NUMA = Disabled NUMA domains within VM OS = 4 C-states = Enabled The technical name for CPU power management is called "C-states". In other words, they've left it on the default (enabled) on a machine that they charge $40K/year for!

xmprt 5y ago

It's not obvious that transportation and quality assurance are cheaper overseas. At this point, China has grown its manufacturing sector so much that it's potentially better than the US in many ways (as far as QA goes). And for transportation, economies of scale mean that it's potentially cheaper to ship a massive container of good to a common port instead of having to hire trucks for each of your factories. I'm not saying that either of these claims are true, but it's not clear that they are false either.

kennywinker 5y ago
The shoes are not all consumed in LA or whatever port city they land in. They go on trucks from there to all the smaller cities. Unless for some reason you need to have many factories spread out to produce what was made in one factory in china (seems unlikely, but for some product this will be true) you have the same shipping logistics except for the big container trip from china and the trip from the port to your distribution center.
- sjwalter 5y ago
  There's a certain large detail elided by this, which is basically the experience of opening up a container from China. When you're doing any kind of non-trivial amount of manufacturing in China, you've got a chain of exporters and workers behind you that specialize in making the un-containering experience fantastic. As in, the standees of celebrity endorsers holding the shoe in their hand for the merchandising station are manufactured right across the street from where the shoe is actually made. The box company making the box are very close by as well. And then even the guys loading up the cargo are making it so it can basically go onto a container in China, go to a warehouse in LA, and be shipped over to Helena, MT, and have six or seven large cardboard containers all slide out of a twenty-footer, then the truck driver is on to the next shoe store. ALL that labour of packaging and boxing and merchandising all happens at basically starvation wages for poor Chinese. It's not JUST making the shoes, it's making the shoes, making the boxes for the shoes, making the merchandising for the shoes, and packaging all that shit together in a container-friendly way that is also friendly to unboxing by American minimum-wage workers. The "supply chain" is about much more than just the contents of the box, but about the entire chain it takes to get to retail.

dehrmann 5y ago

> moving manufacturing overseas can often be profitable for companies For a while, but your competitors will do the same, and unless there's a cartel, one of them will pass all the savings on to consumers, and the rest will follow.

serial_dev 5y ago

I had experience at a company (Germany) where we got smart home products built (electronics). Getting them from China was not only cheaper but (to my surprise) faster and better. They got knowledgeable QA people that understood how EU countries need different tweaks, and they got anything we needed done quickly. Shipping was fast enough, and all in all, they just provided a much better and more affordable product than any country in the EU could have done. It might be different for products that are very innovative, (most shoes aren't), but in that case maybe you can travel to China for a month and iterate quickly with the factory people.

OJFord 5y ago
I don't think it's about innovativeness - because I would say the reverse about shoes, the best are (resp. were) made in Northampton (England), and quality suffers if moved to China. But if you want plastic trainers, no doubt they make the best. I think it's just a simple case of doing a lot of it, specialising, getting good at it, as it would be anywhere. China now has more PCB fab know-how, equipment, people, etc. than anywhere.
- Tsiklon 5y ago
  There’s a lot of great shoes still made in Northampton and the surrounding area NPS/Solovair (if you like the Doc Martens aesthetic) and Crown Northampton (if you prefer a sneaker or dress shoe) both brands are well regarded. But alas neither are inexpensive.
- tweetle_beetle 5y ago
  I think the innovation too has been outsourced to China, even in fashion. Western brands have been reduced to just specifying what is already available for the most part. It isn't really possible to innovate when you don't own your factories and IP is poorly protected. The simple case of just doing it eventually applies to quality too - many high fashion brands like Burberry have discretely abandoned european manufacturing.

baybal2 5y ago

I really doubt you can still hire $3 per hour labour in China anywhere. $11-$14 per hour skilled assembly line work is nothing rare these days in China near big cities.