Supply Chain

Do Quality Standards Force Jobs Overseas?

Aug. 1, 2011

In our book The Distribution Trap, Timothy Wilkinson and I identified a trap many manufacturers fall into when they outsource the sales and distribution of their innovations to "Mega distributors". Because of the pressure to constantly reduce prices, manufacturers ultimately end up in the trap of commoditization and offshoring.

I'm wondering if a similar trap might exist for small American manufacturers in the quality systems area.

The requirement to have a certified system, such as ISO 9001, TS 16949, or NADCAP, is seemingly pushed onto many small manufacturers by "Megas" in various industries.

Under the guise of "Quality", the Megas use the market data they gain in the evaluative process against the same suppliers in their price negotiations. As a result, the Megas are able to spread each manufacturer's competitive advantage across their supplier base; ultimately commoditizing their supplier's innovations and extracting "everyday lower prices".

This then lowers the small manufacturer's incentive to innovate- reducing actual product quality- and raises their costs associated with maintaining the standards, which puts greater pressure on operating expenses and, finally, leads to the offshoring of manufacturing jobs to cheaper labor markets.

What do you think?

About the Author

Andrew R. Thomas Blog | Associate Professor of Marketing and International Business

Andrew R. Thomas, Ph.D., is associate professor of marketing and international business at the University of Akron; and, a member of the core faculty at the International School of Management in Paris, France.

He is a bestselling business author/editor, whose 23 books include, most recently, American Shale Energy and the Global Economy: Business and Geopolitical Implications of the Fracking Revolution, The Customer Trap: How to Avoid the Biggest Mistake in Business, Global Supply Chain Security, The Final Journey of the Saturn V, and Soft Landing: Airline Industry Strategy, Service and Safety.

His book The Distribution Trap was awarded the Berry-American Marketing Association Prize for the Best Marketing Book of 2010. Another work, Direct Marketing in Action, was a finalist for the same award in 2008.

Andrew is founding editor-in-chief of the Journal of Transportation Security and a regularly featured analyst for media outlets around the world.

He has traveled to and conducted business in 120 countries on all seven continents.