I keep hearing people talk about how bad it is to outsource our labor to other countries. Somehow, the act of sending our work to someone who will do it for less is un-American.

The fact is, outsourcing is as American as it gets… almost like apple pie.

I guess it really comes down to is where the division of labor should be. It answers the question of who really is the best person to complete the job at hand. Cost and skill both have to be taken into consideration.

Ken Stewart points us to Master Lock’s labor outsourcing to Asia and Mexico. You can read the full quote there, but here is a part:

In January 1997, Master Lock announced that, after 75 years making locks in Milwaukee, it would begin importing more products from Asia. Not too long after, Master Lock opened a factory of its own in Nogales, Mexico. Today, it makes just 10% to 15% of its locks in Milwaukee–its 300 employees there mostly make parts that are sent to Nogales, where there are now 800 factory workers.

Why is Master Lock willing outsource? Is it because of Walmart? I don’t think so. If it wasn’t Walmart asking for a lower cost, it would be someone else. As a product becomes more prevalent, the price goes down. Just like when a product becomes more scarce, the price goes us… simple law of supply and demand.

I think that outsourcing comes down to two basic reasons.

1. People demand lower prices than the day before. People are willing to pay more when the product is better, the service is better or the perceived value is greater (scarcity causes an increase in perceived value). I have talked about this a lot on this blog here, here and here… to name a few. When the product is the same, the sale will go to the person with the lowest cost.
2. Knowledge is the new commodity of our world… or at least our part of the world. It is common place for there to be many types of workers. People that have different skills sets and different ambitions. Any entrepreneur will understand that it makes business sense to outsource to the lowest cost for the greatest value. Repetitive tasks that can be taught easily should go to an employee that doesn’t have a great level of experience or training… because those people cost too much money.

This may sound a bit crass, but the fact of the matter is there are highly qualified employees outside of this country that are just as qualified to run a stamping machine or answer a phone or code a website. (Bear in mind, I am not saying you should outsource because you can… you still have to consider the customer experience and I would never outsource a phone call to a non-native speaker as a standard.)

Does that mean that our employees are smarter? No. I know plenty of dumb people here in America and my guys in the Philippines and India are very good at what they do for me.

Does that mean that someone from India is less valuable? Absolutely not. I have some very highly qualified people that I work with overseas. I couldn’t be as successful without them.

Every society that has lived on the earth has had a division of labor. The right person for the job. When I send work to India or the Philippines or wherever else I might send work, I make a distinction between what I will allow them to do. I have employees here locally, but I make a distinction of what I will allow them to do as well.

I think outsourcing is critical. I don’t think we sell our soul when we do it. I think we simply make business decisions. If it costs more to outsource, then don’t do it. (Cost can be more than just dollars. It can be customer experience, training time or loss of PR value.)

Of course, you can think of Master Lock providing 800 people with work without encouraging illegal immigration… that has got to be worth some "soul" credit, right?

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Corey Smith is the Chief Web Architect for Dealer Marketing Systems and is Editor in Chief for Office Product News - a news service for the copier, printer and document management industry.

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Tags: India, Master Lock, Outsourcing, Walmart

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