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View Full Version : Outsourcing ! Unbelievable!



Digby
03-09-2012, 12:19 PM
Hi guys

We all know about outsourcing.
Getting projects done overseas by low cost countries.

SEO, Programming, tooling, production etc

But yesterday I got a nice email from a Chinese printing company offering to do brochures and stationary for me.

They are either getting desperate over there, or maybe its a sign of things to come ?

gradebdan
03-09-2012, 12:26 PM
I hope they spell "stationery" correctly.

Digby
03-09-2012, 12:38 PM
He he

Yes its stationely in Chinese

Turn Left Light here.

KarameaDave
03-09-2012, 01:02 PM
Ohhh! Steleotypes...witty.

Digby
03-09-2012, 02:11 PM
And now the government is looking at storing some of our data in the cloud.

I assume what that means is that they will use virtual software and servers overseas, and therefore they will not need NZ IT departments.

Saving them millions and costing more jobs ?

Nick G
03-09-2012, 03:06 PM
And now the government is looking at storing some of our data in the cloud.

I assume what that means is that they will use virtual software and servers overseas, and therefore they will not need NZ IT departments.

Saving them millions and costing more jobs ?
Actually, outsourcing will help us. It is not a bad thing that is hurting the economy, but a good thing that is helping the economy.

mikebartnz
03-09-2012, 03:28 PM
Actually, outsourcing will help us. It is not a bad thing that is hurting the economy, but a good thing that is helping the economy.
I think you need to explain what you mean a little better there.

Nick G
03-09-2012, 03:36 PM
I think you need to explain what you mean a little better there.
Well, you asked for it then :D

First off, outsourcing allows us to buy cheaper products, which is good for the consumer. However, if people want to buy 'NZ made' they can, it will just cost more, which is what you'd expect. So, outsourcing gives us the option of buying cheaper goods, but we still have choice. I think you'd agree that that is good for the consumer at least.

However, there are also the producers. Outsourcing allows us to improve in that area as well. Buy outsourcing what can be done cheaper overseas, we are allowing ourselves to specialize in what we can produce cheaper here. And we can always produce some goods at a lower comparative cost that other countries, even if the absolute cost is higher; its called comparative advantage.

mikebartnz
03-09-2012, 04:08 PM
Well, you asked for it then :D

First off, outsourcing allows us to buy cheaper products, which is good for the consumer. However, if people want to buy 'NZ made' they can, it will just cost more, which is what you'd expect. So, outsourcing gives us the option of buying cheaper goods, but we still have choice. I think you'd agree that that is good for the consumer at least.

However, there are also the producers. Outsourcing allows us to improve in that area as well. Buy outsourcing what can be done cheaper overseas, we are allowing ourselves to specialize in what we can produce cheaper here. And we can always produce some goods at a lower comparative cost that other countries, even if the absolute cost is higher; its called comparative advantage.
Well done.
There are two factors which you don't take into account when looking at the picture of NZ as a whole and they are

Outsourcing will generally render some unemployed which becomes a cost the tax payers have to shoulder. So while the goods may be cheaper the cost to a degree are just transferred.

It puts a greater burden on our overseas exchange which can mean we end up with a greater debt burden.

You just need to look at the USA to see what has happened there.

1101
03-09-2012, 04:22 PM
We simply cant 'close the gate' & not outsource. Its a global economy.
NZ has to compete on price if it wants these LOW PAYING jobs

You mention the US
I'll say look at Russia & NZ & UK in the 70's.Tarrifs, protectionism & import bans Didnt help them at all .
Anyone remember our 18% inflation rate? or the Wage & price freeze ? Yes protectionism, for a tiny economy really was doomed to fail.
Artificially protecting local industry is never a long term solution & can only end in tears.

KarameaDave
03-09-2012, 04:31 PM
LOW PAYING jobs?
I worked in a foundry as a teenager, got paid $70 a week in the hand.
It was more than my father drew from his panel-beating business weekly.
A LOT of money in 1976.
Thousands of these sort of jobs now gone..back then unemployment measured in the hundreds nationally.
You global fans are deluded.

mikebartnz
03-09-2012, 04:41 PM
Anyone remember our 18% inflation rate?
That was in the late eighties under Roger Douglas who reckoned it wouldn't go over 10% and I think it hit 20%.
I often wonder what inflation etc. would be like if we didn't have residual reserve banking.

Nick G
03-09-2012, 04:50 PM
Well done.
There are two factors which you don't take into account when looking at the picture of NZ as a whole and they are

Outsourcing will generally render some unemployed which becomes a cost the tax payers have to shoulder. So while the goods may be cheaper the cost to a degree are just transferred.

It puts a greater burden on our overseas exchange which can mean we end up with a greater debt burden.

You just need to look at the USA to see what has happened there.
Outsourcing will reduce employment in the short term, but in the long term this will mostly, if not absolutely, be reversed due to businesses that produce goods we have a comparative advantage in starting up. Also, the benefit that most people get from buying cheaper goods will outweigh the extra cost that is caused by the small rise in the long-term unemployment rate.

Can't really comment on any burden it will place on our overseas exchange, I'll do some research and then comment.

The one thing I would say would be to look at Australia, which IMHO did the right thing when it came to opening up trade. Instead of just making it a one way thing, they bargained with other countries to reach agreements where both countries opened up trade, thus getting around a possible problem in which they, but not other countries opened up trade. This would have caused problems, as Australian unemployment would have risen due to cheaper goods from overseas. And, if the other countries hadn't also opened up tradeand reduced restrictions, Australia couldn't have reduced it by exporting goods they had a comparative advantage in.

Digby
03-09-2012, 05:21 PM
Yes NZ made a big mistake when we reduced most of our tariffs in one go with out negotiations a deal with other countries.

We are starting to make up for it now with FTA's with China, India and TPP etc.

But assembling making things such as cars and tv's was hopeless.
There was no choice in the shops in those days either.

mikebartnz
03-09-2012, 05:51 PM
Yes NZ made a big mistake when we reduced most of our tariffs in one go with out negotiations a deal with other countries.

We are starting to make up for it now with FTA's with China, India and TPP etc.

But assembling making things such as cars and tv's was hopeless.
There was no choice in the shops in those days either.
What I don't like about the TPPA is the way the negotiations are going on in secret and with the little that has slipped out I can only see the large multi-nationals doing well out of it and the way Pharmac operates will be drastically changed.

mikebartnz
03-09-2012, 05:53 PM
The one thing I would say would be to look at Australia, which IMHO did the right thing when it came to opening up trade. Instead of just making it a one way thing, they bargained with other countries to reach agreements where both countries opened up trade, thus getting around a possible problem in which they, but not other countries opened up trade. This would have caused problems, as Australian unemployment would have risen due to cheaper goods from overseas. And, if the other countries hadn't also opened up tradeand reduced restrictions, Australia couldn't have reduced it by exporting goods they had a comparative advantage in.
Things would be vastly different in Aussie if they didn't have their mining.

Digby
03-09-2012, 05:56 PM
Yes Aussie is over pricing themselves.
Car plants are cutting back
Steel mills are closing
Quantas is outsourciing maintanance
Retail is in trouble.
Call centres are moving to Asia and New Zealand

You cant pay checkout girls $18.00 and expect to sell stuff to Asia !

plod
03-09-2012, 06:02 PM
Hi guys

We all know about outsourcing.
Getting projects done overseas by low cost countries.

SEO, Programming, tooling, production etc

But yesterday I got a nice email from a Chinese printing company offering to do brochures and stationary for me.

They are either getting desperate over there, or maybe its a sign of things to come ?hope you deleted the email. The NZ printing trade is doing hard times at the moment, although the company I work for is doing good.

Nick G
03-09-2012, 06:15 PM
Things would be vastly different in Aussie if they didn't have their mining.
Absolutely. I was merely saying that their attitude to opening up trade in two way agreements made sense to me.

Digby
03-09-2012, 06:30 PM
hope you deleted the email. The NZ printing trade is doing hard times at the moment, although the company I work for is doing good.

Yes I did.
But what amazed me was that they have the need to do this.
And that they can afford to roll though the intent and find companies to email.

They were offering quite sizable discounts.
Some companies will take it up.

The world is getting smaller.

This is why I keep saying we must keep our wages where they are and let Asia catch us up.

mikebartnz
03-09-2012, 06:39 PM
This is why I keep saying we must keep our wages where they are and let Asia catch us up.
Quite agree.

Digby
03-09-2012, 07:01 PM
@Mikebartnz

I have been saying this for the 5 years.
You are the first person I have seen that agrees with me.

Now lets do some brainstorming.

Suppose wages were the same all over the world.
Ie unskilled workers were all on the same wage roughly
And IT workers were all on the same wage roughyl.

What would that do for NZ.
Would we be able to export more or less.

Eg every country (or most) have some natural advantage.
We have lots of grass and water.
China has lots of people.
Chile has lots of copper.
It would all depend on a country's population for manufacturing volume and shipping costs and a countries innovation and education levels.
A lot of manufacturing would go back to the USA.
We would not have so many Indian telemarketers calling us
That Chinese printing company would not have bothered to email me.

I think we had better start a dedicated thread on this...

Greven
03-09-2012, 08:09 PM
The retail religion is only possible because of slave labour. If all the 3rd world workers were paid a decent wage, families would need to save for a long time in order to afford any new electronics & it will actually be worth fixing electronic devices.

mikebartnz
03-09-2012, 08:13 PM
@Mikebartnz

I have been saying this for the 5 years.
I have been saying it for longer.

I was doing the front disks on my car and someone said "why do you bother". Quite simple really. Besides the cost of the labour I source the pads for a lot less than I would pay for them doing so and I don't have to pay any tax on all the money I save.

mikebartnz
03-09-2012, 08:15 PM
The retail religion is only possible because of slave labour. If all the 3rd world workers were paid a decent wage, families would need to save for a long time in order to afford any new electronics & it will actually be worth fixing electronic devices.
No one here would even think of working the hours under the conditions in China for the wages they get paid.

KarameaDave
03-09-2012, 08:18 PM
The retail religion is only possible because of slave labour. If all the 3rd world workers were paid a decent wage, families would need to save for a long time in order to afford any new electronics & it will actually be worth fixing electronic devices.
That's right, I well remember buying my first HIFI, $1200 in 1976, what would that be in 2012 dollars, $8,967.07!!!! according to the reserve bank inflation calculator.
Little wonder I had to save like hell for it.
Today of course Roberts don't make Amps.
(it was the only NZ made component)

Digby
03-09-2012, 08:36 PM
No one here would even think of working the hours under the conditions in China for the wages they get paid.

Whats wrong with working 20 stories up on bamboo scaffolding for a $1 an hour?
or working in any of China's coal mines?

mikebartnz
03-09-2012, 08:53 PM
Whats wrong with working 20 stories up on bamboo scaffolding for a $1 an hour?
or working in any of China's coal mines?
Was that question for Metla.:D

Metla
03-09-2012, 09:20 PM
I think that sounds like a great place for Digby to work.....

Digby
03-09-2012, 09:47 PM
I think that sounds like a great place for Digby to work.....

Which one ?

KarameaDave
04-09-2012, 09:52 PM
You're one of a kind, pal.

pctek
05-09-2012, 08:04 AM
Outsourcing will reduce employment in the short term, but in the long term this will mostly, if not absolutely, be reversed due to businesses that produce goods we have a comparative advantage in starting up. Also, the benefit that most people get from buying cheaper goods will outweigh the extra cost that is caused by the small rise in the long-term unemployment rate.
.

Good theory.
Actually, the countries that were buying all this stuff had plent of money, households wer well off and wanted to buy things.
Then it got sent overseas to be made instead. Everything.
Electronics, cars, clothes, the lot pretty much.
People lost their jobs.
So, no matter how cheap, how do they afford to buy anything?

Destructive cycle...

Nick G
05-09-2012, 09:40 AM
Good theory.
Actually, the countries that were buying all this stuff had plent of money, households wer well off and wanted to buy things.
Then it got sent overseas to be made instead. Everything.
Electronics, cars, clothes, the lot pretty much.
People lost their jobs.
So, no matter how cheap, how do they afford to buy anything?

Destructive cycle...
They afford to buy things because they take up jobs in which their country has a comparative advantage in. And their country will have a comparative advantage in something, even if another country has an absolute advantage in it.

Digby
05-09-2012, 10:03 AM
We in the west are now used to cheap consumer goods.
I suspect our pattern of spendin has changed.
Less on consumer goods more on housing etc.

And yes back in the 80's when this all started we all had jobs, but not much consumer choice.
Now we have lots of consumer choice and no jobs.

Nick, what areas do you see that NZ has a comparative advantage in?
Where we can sell goods all over the world at good prices and provide good paying jobs?

inphinity
05-09-2012, 10:05 AM
I assume what that means is that they will use virtual software and servers overseas, and therefore they will not need NZ IT departments.

You know what they say about assuming...

Nick G
05-09-2012, 10:44 AM
<snip>

Nick, what areas do you see that NZ has a comparative advantage in?
Where we can sell goods all over the world at good prices and provide good paying jobs?

We are good at dairy, I would say we have an absolute advantage in that area. Unfortunately we are not making the most of it, as it is possible to dairy with much less environmental impact than we are now.

I would say we would have a comparative advantage in lamb, this also extends to wool. For example, the Japanese company using our wool to make top quality coats - if we pushed this in other countries it could prove lucrative. Going off stats nz, wood products are a important export, which would tend to indicate we have a comparative advantage relating to wood products. If we manage our forests well this could grow as others exploit their forests, thus reducing supply and making ours more valuable. Same with fish, if we manage our fish stocks well they should continue to grow in importance as others kill of their stocks due to overfishing.

Fruit was another substantial export, which would tend to indicate we have a comparative advantage in this area as well. For some things, like the kiwifruit, we have an absolute advantage which could prove important if we get rid of PSA.


I see two main problems here however. One is said PSA, if we are going to have free trade we must monitor our border very closely. The other is dairy, we need to start ensuring it has as small an environmental impact as possible as it will hurt our tourist industry. If we do both of these we could help ourselves.
__________________________________________________ __________________________________________________ ___________________
Of course, there is a white elephant in the room here, which I will also cover - the Treaty payments. These are hurting our economy. I think what would be a good way to stop this while still being realistic would be to do two things. One would be to cut down and stop stupid claims, such as airwaves, water, wind. Number two would be to change how Treaty payments are made. I think that a great solution would be to, instead of paying it directly, put payments into a 'Maori fund'. Then, Maori could apply for money from the fund, first having to prove how it would help Maori, particularly poorer class Maori, or the environment. This could mean that the fund could be used for Maori scholarships, insulation for Maori, even a food subsidy for poor Maori, or it could be used to pay to clean up a river if they wanted.. This would cut down on treaty payments, and help ensure that the money given to them goes to good use.

Gobe1
05-09-2012, 10:51 AM
Who says the cloud is overseas? there are cloud services based in NZ.

mikebartnz
05-09-2012, 11:27 AM
Who says the cloud is overseas? there are cloud services based in NZ.
They have said initially they will be using NZ services but it might be a slippery slope.

Digby
05-09-2012, 11:35 AM
Nick

You mention prodcust that NZ does has comparive adbnategs in and that we do well with.
Dairy
Wool
Lamb
Wood
Fish
Fruit
Kiwi Fruit.

You are right about all of those.
But imho NOT ONE of those provide good high paying jobs, aside from wood perhaps.
And if any of those industries put their wages up to say Australian levels those industries would suffer hug export losses.

So could you care to offer some other examples ?

(Don't get me wrong I'm on your side, I just like to see NZ exporting more and importing less)

mikebartnz
05-09-2012, 11:58 AM
We are good at dairy, I would say we have an absolute advantage in that area. Unfortunately we are not making the most of it, as it is possible to dairy with much less environmental impact than we are now.
Fonterra is setting up dairy farms in China and South America so we will be doing the same there as we did with Kiwi fruit.
A shipment of in calf 2y cows just left Napier recently bound for China. I am not sure how many thousand it was but I know it was well over three.
So once again we are shooting ourselves in the foot.


I would say we would have a comparative advantage in lamb, this also extends to wool. For example, the Japanese company using our wool to make top quality coats - if we pushed this in other countries it could prove lucrative. Going off stats nz, wood products are a important export, which would tend to indicate we have a comparative advantage relating to wood products. If we manage our forests well this could grow as others exploit their forests, thus reducing supply and making ours more valuable. Same with fish, if we manage our fish stocks well they should continue to grow in importance as others kill of their stocks due to overfishing.
Did you know that there is more goat meat eaten in the world than lamb/mutton.
We now have about a third of the sheep numbers than what we had in 1984.
The Italians are the ones that take our best quality wool, usually merino, for the high class suit market but farmers hardly find it worth taking it off the sheeps back most years as there is just not enough money in it. Merino's aren't successful around most of NZ.
As for forestry the problem there is they want our logs but not so much a finished product so not a lot you can do there unless we banned the export of whole logs.
Not a lot more we can do with fishing except with fish farms. The 1960's - 1970's proves what happens as that was when we plundered the seas for Orange Roughy.


Fruit was another substantial export, which would tend to indicate we have a comparative advantage in this area as well. For some things, like the kiwifruit, we have an absolute advantage which could prove important if we get rid of PSA.
Kiwi fruit is about stuffed since that virus came in and since we let them grow it in South America and Italy we don't have a great advantage there and we have no real advantage in any other fruit.
Manuka honey is one area we do have a real advantage in because of its UMF and so its health properties.


__________________________________________________ __________________________________________________ ___________________
Of course, there is a white elephant in the room here, which I will also cover - the Treaty payments. These are hurting our economy. I think what would be a good way to stop this while still being realistic would be to do two things. One would be to cut down and stop stupid claims, such as airwaves, water, wind. Number two would be to change how Treaty payments are made. I think that a great solution would be to, instead of paying it directly, put payments into a 'Maori fund'. Then, Maori could apply for money from the fund, first having to prove how it would help Maori, particularly poorer class Maori, or the environment. This could mean that the fund could be used for Maori scholarships, insulation for Maori, even a food subsidy for poor Maori, or it could be used to pay to clean up a river if they wanted.. This would cut down on treaty payments, and help ensure that the money given to them goes to good use.
Unless that money is going overseas it doesn't change things too much for the economy. More of a worry is the lack of NZ owned companies so retaining dividends and profits here.

1101
05-09-2012, 12:09 PM
Digby makes a good point
NZ has allways relied on primary produce as our main export. This( & tourism) will never make NZ more than a poor country, over the long term. As land prices skyrocket,& wages & costs increase we will have less & less of a competitive advantage.
Plenty of counties with spare land for farming, look at all the food we now import from China, because its cheaper than growing in it NZ . So dont expect any economic miracles based on farming.

We have some HUGE companies in the farming industry. These companies cant get all this so called extra sales & revenue that some 'talk' about , these magical mystery markets for our goods dont exist in the real world.

We arnt a 1st world economy, at the mo NZ is just living on borrowed $$ . Our real wages will eventually drop to match, unfortunately for all of us cost of living just keeps going up.

Nick G
05-09-2012, 12:25 PM
Unless that money is going overseas it doesn't change things too much for the economy. More of a worry is the lack of NZ owned companies so retaining dividends and profits here.
Well, I can rebut that point. By actually doing decent things with that money we can lower health costs, which will help the economy

Digby
05-09-2012, 12:27 PM
@MikeBartnz

A very good summary, probably all true.

So its Manuka honey then that is our one true competietve advantage in the agricultural world.
So if we could just double our Manuka honey exports, then ......

But Kudos to the companies that do sell it, but its always going to be small bikkies.

Yes you mention Tourism as well.
As you say that is big another industry that employs low paid workers.

And yes 1101
We do keep hearing about the huge markets eg milk powder for babies. And as you say surely Fonterra would be selling it if they could in NZ branded cans not bulk bags.

The interesting thing is that NZ does quite well in IT as many of you will know.
We also have lots of small niche manufacturers that export high tech products, but they are never going to be huge.

Then we get the situation where a company does start to get big and they sell out so that the profits and dividends and jobs go overseas

So where is our Competive Advantage ?

Nick G
05-09-2012, 12:36 PM
Fonterra is setting up dairy farms in China and South America so we will be doing the same there as we did with Kiwi fruit.
A shipment of in calf 2y cows just left Napier recently bound for China. I am not sure how many thousand it was but I know it was well over three.
So once again we are shooting ourselves in the foot.



Nope, we are not. As long as fonterra owns the plants and farms, its great! We get profits, they get the stuffed environment.

Nick G
05-09-2012, 12:42 PM
<snip>

So its Manuka honey then that is our one true competietve advantage in the agricultural world.
So if we could just double our Manuka honey exports, then ......


The interesting thing is that NZ does quite well in IT as many of you will know.
We also have lots of small niche manufacturers that export high tech products, but they are never going to be huge.

Then we get the situation where a company does start to get big and they sell out so that the profits and dividends and jobs go overseas

So where is our Competive Advantage ?
You've just said it. Niche manufacturers that do small exports. If we have more of those, it will all add up.
Oh, and can we stop saying we should be like Australia? They have lots of minerals, we don't. That's it.

mikebartnz
05-09-2012, 12:42 PM
Well, I can rebut that point. By actually doing decent things with that money we can lower health costs, which will help the economy
You don't really rebut it at all. The trouble with that is what you decide is decent things will probably be totally different to what I decide.
Health costs are a burden and what we need to do there is have the ambulance at the top of the cliff and not at the bottom.
ACC has a real problem there. I know a guy who if he had the operation he required within a short time of his accident he would be back in full time work now but ACC mucked him around going from one specialist to another and now he will probably never work again in his life. He can't even drive a car for more than half an hour now.

mikebartnz
05-09-2012, 12:48 PM
Nope, we are not. As long as fonterra owns the plants and farms, its great! We get profits, they get the stuffed environment.
Fonterra can't own the land there and we are helping to kill our own local dairy industry by doing that just like we did with kiwi fruit.

mikebartnz
05-09-2012, 12:49 PM
You've just said it. Niche manufacturers that do small exports. If we have more of those, it will all add up.
Oh, and can we stop saying we should be like Australia? They have lots of minerals, we don't. That's it.
Who has been saying we should be like the Aussies?

Nick G
05-09-2012, 12:53 PM
Who has been saying we should be like the Aussies?
Didn't mean you, I was just trying to stop it from coming up in this thread.
Fonterra can't own land. And that is why we should...be like Australia*...and make sure it is a two way thing. If we did it would be pretty good.

*Yes, I did notice the irony :D

Digby
05-09-2012, 12:53 PM
You've just said it. Niche manufacturers that do small exports. If we have more of those, it will all add up.
Oh, and can we stop saying we should be like Australia? They have lots of minerals, we don't. That's it.

Yes Germany has lots of small family owned business making industrial stuff like gears, etc and they do very well.

Yes forget Aussie, they are going to price themselves off the world market.
And as you say they have lots of minerals (in the outback) we have some (in Coromandel)
And our coal needs to be dug out not open cast etc.

But we do have lots of rain, which comes back to farming.
I just wonder how much more of our land we can turn into high density farming and wineries etc, without ruining our waterways even more than they are.

But getting back to those cows, once they are over there, the Chinese will find ways to breed from them.
They will never be able to export diary as their population is too large, but it could affect our exports to them one day.

mikebartnz
05-09-2012, 01:39 PM
But getting back to those cows, once they are over there, the Chinese will find ways to breed from them.
They will never be able to export diary as their population is too large, but it could affect our exports to them one day.
Exactly.

Gobe1
05-09-2012, 05:19 PM
But getting back to those cows, once they are over there, the Chinese will find ways to breed from them.
They will never be able to export diary as their population is too large, but it could affect our exports to them one day.

Na, they cant afford fonterras products. Chinese breeding from cows...:weird look: