Chief executives considering closing U.S. factories and having the work done offshore might want to talk with Joe Charles first.
Charles, chief executive of Rolling Meadows-based Charles Industries Ltd., has been there, done that, and won’t be returning anytime soon, thank you.
After using workers in Haiti, Mexico and the Philippines, Charles plans to stick with his plants in Illinois, Nebraska and Missouri to turn out products for his telecom equipment business.
“What happens when you go offshore is your inventory increases, productivity tanks and you have little control over quality,” said Charles. “I don’t think you save money. I know there are a lot of people selling that program, but I’ve tried it, and it just didn’t work.”
Unlike a lot of telecom equipment-makers these days, Charles is making money. One reason is that the firm keeps looking for products that its customers need, such as equipment that extends the distances over which a phone carrier can deliver high-speed data service on copper lines.
Naperville-based Tellabs Inc., which has chosen to close its assembly plant in Bolingbrook and outsource the telecom equipment production to a plant in Mexico, expects the move will save money.
Michael Birck, Tellabs’ chief, said he didn’t make the move because Mexican workers are paid less than Americans, but rather because the outsourcing firm can buy components in greater bulk at a lower rate. Also, during the current downturn, there were often times when there was little for the Bolingbrook plant to do.
Another local telecom equipment firm, Westell Technologies Inc., is prospering despite the downturn, and it continues to produce most of its products at its Aurora facility.
Van Cullens, Westell’s chief, has exploited the firm’s expertise in making DSL equipment that carriers need to deliver high-speed Internet to customer premises. By keeping production domestic along with research and development, Cullens said, he is able to keep better control over new products and get them ready for market more quickly than he could with offshore production.
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In-house recovery: The blackout that afflicted about 50 million North American customers this month produced one unusual statistic–fewer than 100 organizations invoked access to “hot sites” offering back-up computing and communications for use in emergencies.
“What that shows is how much organizations are making their own arrangements to prepare for such emergencies in-house,” said Tim de Lisle, managing principal of Corigelan, a Chicago consultancy composed of former senior executives from Comdisco, the company that pioneered use of hot sites.
“Hot sites made a lot of sense in the era of the mainframe computer,” said de Lisle. “But with distributed computing, they’re less necessary.”
Most companies have developed their own emergency plans that include backup power supplies when commercial electricity becomes unavailable and computer backups when networks experience trouble, he said.
It’s a good thing that so few organizations sought to use hot sites during the recent electrical grid failure, de Lisle said, because had thousands sought to use those facilities, many would have been disappointed.
“These are shared facilities, and there are usually no guarantees,” he said. “The hot sites are sold and sold again. If you have a widespread disaster, you’ll have many organizations contending for the same limited facilities.”
While shared hot sites can be a good solution for some businesses, many will find it is cheaper and smarter to plan to do their own recovery planning, he said.