Manufacturers Outsourcing Repairs Overseas
April 18, 2016
A continuing trend over the last few years has been for US hardware manufacturers to outsource their equipment repairs overseas, typically to Mexico. While this is not something that they want to advertise, such outsourcing provides manufacturers with significant cost advantages.
One specific example is a US based manufacturer that charges their customers $185 to repair an item they sell. For this repair they paid a US based third party repair company $65, which gave them a healthy profit of $125. However, they found that outsourcing the repairs overseas could deliver an even higher profit and they moved their repairs to a foreign country where they were charged $25 for each repair.
Now most companies have a duty to their shareholders to deliver the highest profit and the company in this example was repairing over 500 units per week, and so the profit here was very healthy. However, there are certain non-economic costs in this outsourcing that need to be considered.
The biggest cost is to the customer, or end-user of the equipment. Anecdotal evidence of disastrous consequences of repairs being done overseas abound in the industry. We’ve seen examples of the wrong equipment being returned to the wrong customer. Long, long turnaround times of 30 to 60 days can occur. Equipment has been lost or damaged upon return. One high end monitor manufacturer sends their repairs deep inside Mexico; a 30 hour roundtrip journey on rickety roads in a van with no air conditioning. Consequently, the quality of repairs also suffer, with many items failing again soon after return.
Environmental issues are also a concern – laws concerning the disposal and treatment of ewaste are very poor in some countries, and tougher American laws can be circumvented by sending repairs overseas.
So the outsourcing trend continues as the manufacturers bring in the profits. End-users are seldom, if ever, told their repairs are being done overseas, but they are just left to count the cost in delays, poor repairs and unreliable equipment.
