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  1. #1
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    Semi OT: "insourcing" complex bike parts?

    Just curious to poll the NorCal folks working in engineering & manufacturing... The Atlantic has a fascinating article (link HERE) about the return of certain complicated product assembly processes to the US, and it got me wondering what the implications might be for the bicycle industry. If you take a notoriously complicated, costly and trouble-prone part -- like dropper posts or disc brakes -- it seems as if some of the benefits of having designers and fabricators in the same place could possibly apply. The trend described in the article seems to have important implications for the Bay Area with its history of engineering & design, including a couple prominent bicycle companies (Fox, XFusion, Specialized come to mind). So it's a trend I'm watching closely.

    What say you? Plausible? Pipe dream?
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    Disc brakes and dropper posts are trouble prone?

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    I say it's very possible. In general, there are many talented engineers in the bay area and most, if not all, of the design engineering is done here. The manufacturing, however, is usually shipped oversees due to cost, and then final assembly may be there as well or done back in the states. The cost benefit of going oversees is still very tangible, but it is increasing and there is always the issue of Intellectual Property, which is very serious for most. The trend to bring back a lot of MFG to the states will wholly depend on those that want it and make it happen for now. In the future I think we'll see more companies bring these process' back home, but it will take time. I could go on and on about this topic.

    For reference I am a Mechanical Engineer in the Bay Area and I have been in the design industry, both large corporate and small start-up for almost seven years. Not a long time compared to others, but enough to understand this topic.

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    people always assume that outsourcing is only about labor/cost arbitrage, but it can also be about availability. i have friends who work as EEs, and i used to work as an engineer as well. Several of the EEs have told me that in some cases, engineers in taiwan can make as much or more than engineers here--but that its often just easier to find the right skill set overseas.

    i think the bay area is atypical of the US with respect to the availability of talented engineers.
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    I haven't read that story yet, I should

    I work as a ME. I've worked on a few consumer products, and am working on some high tech complicated assemblies all of which are sourced and assembled overseas. I've done some freelance work on some bicycle parts. I've also worked at some places which are vertically integrated and operate in this country.

    I don't think this will happen with the bike industry for several reasons. Most of the high end bike industry operates in Taiwan, and it actually does a good job meeting the needs of assembly and manufacturing required of it. To a large degree, the general skill set of the people working on these products improve over time.

    If anything I am more aware of cases of bike companies moving manufacturing to Taiwan from the US to improve quality. I think the bike industry is a special case, in that let's say 90% of the supply chain exists in Taiwan. There are advantages to having a local supply chain. Shorter lead times, reduced transportation costs, etc. One of the products mentioned in the Atlantic article are high end kitchen appliances, which will probably end up with US customers.

  6. #6
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    Quote Originally Posted by dth656 View Post
    people always assume that outsourcing is only about labor/cost arbitrage, but it can also be about availability. i have friends who work as EEs, and i used to work as an engineer as well. Several of the EEs have told me that in some cases, engineers in taiwan can make as much or more than engineers here--but that its often just easier to find the right skill set overseas.

    i think the bay area is atypical of the US with respect to the availability of talented engineers.
    That's one of the worst things about outsourcing. The US has lost its expertise through disuse.
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  7. #7
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    Heavy inexpensive products are easier to insource due to the ever increasing shipping costs, which would make sense for kitchen appliances.

    I haven't read the article, but I read before is that insourcing applies primarily to complex parts sold in small quantities. In the long run, south east Asia cost advantage will go away, just like it did in Japan, and costs should be the same everywhere. Furthermore, with the fracking boom we are getting an energy cost advantage compared to other countries which will help us as well. The major issue is what Plim alluded to. After years, decades, of outsourcing everything, do we even have the skillset at home to insource all that work? That may well be the biggest problem. If your kids don't want to pursue a bachelor, tell them to learn how to weld or become a machinist. Those are the jobs of the future.
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    Quote Originally Posted by Plim View Post
    That's one of the worst things about outsourcing. The US has lost its expertise through disuse.
    i agree w/ that statement wrt to welding, manufacturing, and other skills. (although only semi-related, germany and japan still manage to retain a manufacturing base despite being high cost locations---higher cost than even the US).

    however, wrt to engineering, i think there is a cultural dynamic at work. the US has a dearth of engineers. for some reason, americans don't think it's cool to study difficult subjects, or they want to party in university, or something. i'm not sure what that something is. but if you visit any top ranked engineering university, and look at core engineering, math or physics (or any "STEM" major) courses, you will see immigrants or the children of immigrants disproportionately represented.
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  9. #9
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    As an MTB'n mfg. systems student with A.S degrees in machine tool tech & numerical control and a job in the precision mfg. industry, I'm watching this thread with great interest. There's a lot I wanna say, but I'd rather just read other folks' input on this.
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    Quote Originally Posted by dth656 View Post
    people always assume that outsourcing is only about labor/cost arbitrage, but it can also be about availability. i have friends who work as EEs, and i used to work as an engineer as well. Several of the EEs have told me that in some cases, engineers in taiwan can make as much or more than engineers here--but that its often just easier to find the right skill set overseas.

    i think the bay area is atypical of the US with respect to the availability of talented engineers.
    The Asian engineers may be on par w/ US wages, but the wages of the people who actually make the parts on the shop floor, and the overhead costs of the production facility is far far faaar less in Asia than the US.

  11. #11
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    Quote Originally Posted by ARider View Post
    The Asian engineers may be on par w/ US wages, but the wages of the people who actually make the parts on the shop floor, and the overhead costs of the production facility is far far faaar less in Asia than the US.
    True, but wages of factory workers in China and Taiwan are increasing rapidly, reducing the labor cost advantage of producing there, when weighed against other costs such as shipping, coordination, logistics, difficulty of midstream changes, etc.
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    Quote Originally Posted by ARider View Post
    The Asian engineers may be on par w/ US wages, but the wages of the people who actually make the parts on the shop floor, and the overhead costs of the production facility is far far faaar less in Asia than the US.
    absolutely agree w/ you that currently cost of production is cheaper in asia. however, increasing wage pressures are eroding that somewhat (and you see companies looking for even cheaper labor markets), also, germany and japan are very high cost locations, and still manage to manufacture some stuff competitively. not sure what the secret is tho...
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    I would love to see more mfg return to this country. The wages and costs in Asia may be increasing, but they are still very low. Unfortunately (for US citizens) the Chinese government in particular plays a huge role in controlling costs of mfg in China and will go to great length to keep the mfg happening there.

    Like the article states, what will revitalize the US mfg industry is quality, adaptability, innovation and not having the huge distance and disconnect between development and manufacturing. It really does seem stupid to develop the product and technology in one country, and have it made by a vendor in another country many thousands of miles away, often times with little control of the process.

    What will also need to happen is the education level and skilled labor training in this country needs to rise. The art and skill of machining and manufacturing on a large scale has been gone so long from the US, it will be hard to get back. Ad I'm not talking about someone on an assembly line tightening bolts all day everyday. I am talking about people who can be handed a drawing, CAD file, idea, or concept and actually make it!

    Does anyone even know what a tool and die maker is anymore? There are so few left in this country it is pathetic.

    When I see high tech local companies such as Apple pulling mfg from China (yeah right, huuuuge margins currently), then I will be excited.

    Hopefully it will happen in time for my 5 year old machinist-in-training to experience.

  14. #14
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    Quote Originally Posted by ARider View Post
    I would love to see more mfg return to this country. The wages and costs in Asia may be increasing, but they are still very low. Unfortunately (for US citizens) the Chinese government in particular plays a huge role in controlling costs of mfg in China and will go to great length to keep the mfg happening there.

    Like the article states, what will revitalize the US mfg industry is quality, adaptability, innovation and not having the huge distance and disconnect between development and manufacturing. It really does seem stupid to develop the product and technology in one country, and have it made by a vendor in another country many thousands of miles away, often times with little control of the process.

    What will also need to happen is the education level and skilled labor training in this country needs to rise. The art and skill of machining and manufacturing on a large scale has been gone so long from the US, it will be hard to get back. Ad I'm not talking about someone on an assembly line tightening bolts all day everyday. I am talking about people who can be handed a drawing, CAD file, idea, or concept and actually make it!

    Does anyone even know what a tool and die maker is anymore? There are so few left in this country it is pathetic.

    When I see high tech local companies such as Apple pulling mfg from China (yeah right, huuuuge margins currently), then I will be excited.

    Hopefully it will happen in time for my 5 year old machinist-in-training to experience.
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  15. #15
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    Quote Originally Posted by motorbacon View Post
    dropper posts are trouble prone?
    The ones made overseas are.
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  16. #16
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    Quote Originally Posted by budgie View Post
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  17. #17
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    The more common term is "onshoring". I'm an ME in manufacturing. We outsourced a lot of our subassemblies to China. There are some very good engineers over there. Next year there will be another mandatory labor rate increase in China which will make the cost savings less. There was a rate increase earlier this year too.
    Once our management got a taste for the cost savings China can provide a few years ago, they couldn't help themselves even if the ROI is years away. They only look at the per unit cost reduction. Never mind the fact that it'll take a lot of those units to pay off all the hard tooling we had to buy before we actually see any real savings.
    I had this crazy idea to set up manufacturing on an Indian reservation. So many people there are out of work and I think there could be a tax advantage due to being on a reservation. You'd have to make some sort of deal with the tribe but it could be win-win.
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  18. #18
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    As a Process Engineer, in the simiconductor/ laser diode field, competetion with the Aisian market has always been a concern. This I'm certain this holds true with any product, manufacturing is the same regardless of the product. With the new generation of Engineers being indoctrinated with "lean manufacturing" as a focal point they have lost focus on the goal of producing their WIDGET using the abilities of our creative ingenuity. Yes SPC, QS9000 and other QC measures will reduce yeild loss and improve the bottom line, but to be competetive requires more. You must be able to build the machinery necessary to expedite the process, and this ability comes only with decades of experience. When the Engineers of today will leave the office and get out on the plant floor and really look at the processes they've implemented and abandon the "status quo" will this change

  19. #19
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    Quote Originally Posted by dth656 View Post
    absolutely agree w/ you that currently cost of production is cheaper in asia. however, increasing wage pressures are eroding that somewhat (and you see companies looking for even cheaper labor markets), also, germany and japan are very high cost locations, and still manage to manufacture some stuff competitively. not sure what the secret is tho...
    Indeed. My main bike is made in Germany, so are all the forks I use. It is not more expensive than high end stuff from Taiwan - though part of it is buying direct..

    It will be interesting to see how this whole trend of 3D printing/rapid prototyping will affects things.

  20. #20
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    Quote Originally Posted by Axe View Post
    It will be interesting to see how this whole trend of 3D printing/rapid prototyping will affects things.
    Agreed. One effect is that it throws retooling costs out the window, making mid-stream changes very fluid. If anything, this would make it even more advantageous to consolidate design and manufacturing operations.
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    3D printing will never replace subtractive manufacturing. It's way too slow and it is also very imprecise. I'm sure it will improve, but it is not the way to make lots of stuff cheap. It is a great way to knock out prototypes. Although, I am working on a prototype right now that was originally done on a 3D "printer". The product does not have a good finish, so I am machining one.

    The current buzzword is "reshoring".

  22. #22
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    Having seen first hand examples of what high-end rapid prototyping can do I think is a lot of room for it to grow in the future.
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