You get what you pay for

Crest ToothpasteRecent news about the safety or otherwise of imported Chinese food medicine and toys has a lot of people blaming Chinese safety standards.  However a couple of commentators have highlighted that western economies’ predilection for outsourcing is another important cause.

The State reports on a dramatic increase in product recalls in the USA as a result of outsourcing:

“As the supplier is pressured to lower the cost, something has to give.  The bottom line is, you get what you pay for.”

Meanwhile Chandran Nair, the CEO of the Global Institute for Tomorrow, says:

“China cannot avoid blame, but surely responsibility for these latest supply chain scandals must be shared. As price-cut demands from customer companies bring about cut-throat price competition among suppliers further down the supply chain, how can business leaders, lawmakers, activists, or commentators reasonably expect high quality? How can they not reasonably expect that something will fail? Workers’ conditions, the environment and product quality – all are jeopardised.”

In finance outsourcing is as much an issue in manufacturing, with thousands of jobs moving each year to countries that can providing bank services for a lower cost (read lower wages).   Just as there may be a safety risk for customers who trust their teeth to Chinese toothpaste there may be a safety risk for customers whose banks have cut costs by outsourcing their banking services offshore.

However, in the week that Commonwealth Bank of Australia CEO, Ralph Norris, got a 58% pay rise, perhaps this letter writer has hit on a form of outsourcing that might help:

“CEO pay among the Fortune 500 companies is about 364 times the average worker’s. Yet when times are bad, all you hear from the talking-head CEOs is labour costs and health care costs, and we need to outsource to cheaper countries to be competitive. Maybe we should outsource the CEOs.”

(thanks to sinosplice for the photo)

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