Offshoring again

Several good customers indicated they’ll be issuing jobs in the last quarter of 2015 and, with other accounts cutting back, we can use the work.

Even with a good fourth quarter and my natural optimism, reports from contacts at some of our larger customers concern me. It mostly relates to a return of offshoring, not only the machining of important products, but the divesting and transferring of their jobs to other countries, particularly the Far East and India.

In one example, a large U.S. conglomerate acquired many smaller companies that were longtime customers and strategically revamped their approach to sourcing—to our detriment. Their strategies and new contract terms evolved into a typical big-corporation approach, requiring us to reevaluate the profitability of their work.

As is common in this scenario, the corporation became more price-conscious and demanding, wanting to extend payment terms to unsatisfactory timeframes, perhaps Net-90 or longer. We attempt to work through these situations, and even offer discounts for prompt payments. Occasionally, they agree, but more often than not, they aren’t flexible.

Over time, the terms and conditions became more difficult and most of the work dwindled or went away—usually overseas. To make matters worse, a longtime contact at that same corporation said he was being laid off, along with other skilled employees, with many of the positions transferred as well. This was not because of reduced demand for the company’s products, but because the company views the employees’ capabilities and skills as commodities and no longer values them in the same way.