The Real Cost of Outsourcing

So the other day I wrote about the process of offshoring, and the tendency to have incompatible parts in the 'same' product. This has prompted a number of questions, such as "That's not right, all the products that are called a Model X 9000 are the same, both inside and out, aren't they?"

This is simply not true.

And to understand why, we need to take a bit of a dive into the murky world of electronics offhshore production. For one, when companies offshore (or as we'll call it, outsource) the manufacture of an electronic good, they have a few key considerations: 1. How well will the product do what it says it will? 2. How long will it last? 3. Will choosing this vendor damage our brand in any way, due to a high rate of returns/defects, or lack of reliability in the supply chain? And of course, the big one, 4. How little can I get it for, while keeping these other three things in mind?

From the contract manufacturer's point of view, there are only three considerations. 1. How much am I going to get per unit? 2. How cheaply can I get my materials? 3. How low can I keep my 'production costs' (read 'Labour'). and still ensure my employees come to work every day (because reliability of delivery is key)?

The thing to know about major offshore electronics productions facilities, is that they are not exactly a lone gleaming warehouse surrounded by rice paddies. To the contrary, they are located in areas densely populated with electronics part suppliers. All of whom are trying to get a piece of the action going on down the road.

So the parts suppliers have salespeople who knock on the big warehouse door daily, saying that their part will do what the other guy's part will do, for $0.005 cheaper. Yes, it's that little of a difference. In fact it turns out the manufacturers have a contractual obligation for the most part to listen to these salespeople, and find ways of doing things more cheaply. (See Section 7.4)

A few years ago, I worked at a company that outsourced our production to China, and the main ingredient in product X was brass. As the price of copper jumped by 300% in four years, we started looking around for ways to save on copper. One day, a batch of samples arrived in the office just before I taught a class on our quality. In the middle of the class, I disassembled the product to demonstrate its all brass construction, and found a big plastic insert holding it together. From the exterior, it was indistinguishable from the previous iterations (even the difference in weight was only 2-3 grams - too little for the average person to notice). On the inside, it was completely different.

When I inquired at Head Office as to why the change was made, the difference was $0.015 per unit. The thing was, we moved over 1,500,000 of this item a year, so the savings were..carry the one... close to $23,000. Doesn't seem that much, but if you reproduce those savings over the entire 100 item catalog, the money starts to add up.

That is why, in the post industrial future, the idea that we can all trot our beloved consumer electronics down to 'Ye Olde iPhone Repair Shoppe' is little more than a pipe dream. Not only can the specifications of the parts change from factory to factory, but they can even change from production run to production run within the same factory. All in the interest of saving money.

So now, for 'Ye Olde iPhone Repairpersonne' to fix your iPhone, she doesn't only need to find a discarded 2nd Gen 16 GB iPhone with the part you need still intact, she needs a discarded 2nd Gen 16 GB iPhone where the first 12 digits of the Serial Number match, or with some similar indication that they came from the same production lot.

Good luck with that.

Admittedly there are repair places now that can fix these items, but they are doing so with parts shipped from the same factories that supply the original manufacturers. Factories that are 1000's of miles away. The distance isn't a big deal now, but in a world where even bunker fuel commands a premium price, shipping the parts isn't going to make any more sense than shipping the original item.

Back to my original point: Maybe if we stop relying on our electronic devices to entertain us all the time - or if we had that option slowly taken away from us - maybe we would start to do other things with our time. Things like growing our own vegetables, or going to the park to play with the kids or have a picnic with friends, or even volunteering to fill some need in our community. Maybe even just bringing cookies to a neighbor who is home ill for a couple days. These are the things that enhance our quality of life - not how many GB's or hours of battery life we can cram onto a device.

Don't get me wrong, this whole discussion never would have even come up if I hadn't been trying to fix my iPod, so I could continue to get my 'fix' of daily tunes on the 1 1/2 hour train/bus trip to downtown Toronto every day. Like I said, I'm down to my 500mb shuffle (which, for the record bought used off of Kijiji), and when that's dead...I'm going to have to think long and hard about if I replace it, or with what.

Trying to wean myself off the electronic bottle is one the more difficult tasks for me in preparing for a future with a whole lot less cheap energy. But the tasks I am replacing it with sure beat sitting in a shopping mall overnight waiting for a future that's only going to flourish ever so briefly.

The Throw-Away Economy

It has been a frustrating evening.

My iPod (for the record, a 1st gen, 20Gb model) had a problem with the headphone jack. For some reason, the headphones would not plug in all the way, and no matter how I poked and prodded, I couldn't get the obstruction (if indeed there was one) to come out. I had already replaced the battery a few months prior, and was now faced yet again with a dead iPod.

But lo and behold, I found an identical looking back cover (complete with headphone jack and on/off switch) on ebay for a lousy $7! I emailed the seller, and asked which version it was.

The donor was a match, and I won the bid, and waited anxiously for the 'organ' to arrive.

When I got home tonight, I went straight to work, carefully prying off the back cover, plugging in the cable that attached the bits on the back cover to the main iPod. It fit kind of funny, but I thought I'd make a go of it. I plugged it into the charger, and got set to rock and roll.

Did the headphones work? I'll never know. The iPod was locked, and no matter what I did with the lock/unlock button, nothing would make it unlock. In other words, the main iPod "body" did not recognize the new implant. Organ rejection was imminent.

I pried it open again only to realize that the tiny little cable was about 1 mm too small on either end to fit properly into the slots on my old iPod.

So I binned the whole lot in frustration (although to be honest, I may try pulling it out and selling it for parts on Kijiji).


It has been noted among many Peak Oil advocates that in the future, as the cost of either a) producing consumer goods, b) shipping them from the other side of the planet, or c) both, rise with the price of oil, that people will turn repeatedly to repairing that which they already own.

Unfortunately, when it comes to many (most?) of the small consumer items we take for granted, this may be somewhat wishful thinking.

The problems are twofold: Who is going to know how to fix things like cell phones, coffee makers, and Blu-Ray players (all of which have microchips and circuit boards), and where are they going to get the parts to fix them?

Back in the original days of munitions production the problem was that a trigger from one gun would never fit another gun...and a hammer from a rifle could only be used on the rifle for which it had been custom made. One of the things that made the U.S. such a world power, was that their arms manufacturers quickly realized the importance of standard, interchangeable parts, and began churning our firearms by the bushel.

Unfortunately, in the world of consumer goods, we may have returned to antebellum levels of part-incompatibility. A Brand X, Model 100 made in Malaysia is often made of parts that are completely incompatible with a Brand X Model 100 made in Taiwan, and so on.

In the world of offshore production, the specs that most companies are concerned with are performance and durability - the 'what it does, and for how long', not so much the 'what bits it uses to do it'.

Sure your coffee pot is broken, but when you take it in to your 'guy' (as in, "I can get that fixed for you, I know a guy"), he pokes around for a few minutes and says "Oh, that's a XYZ chip board, and those are hard to find. Leave it here and I'll see what I can do."

Your options at that point are going to be limited to either getting a new coffee pot (which was what the manufacturers intended, but may become increasingly difficult) or developing a taste for hot chocolate.

Life in a post-carbon economy is not just going to be about endlessly repairing and jerry rigging our treasured electronic consumer goods, it's going to be about letting go of things that improve our 'standard of living', but really do nothing for our quality of life.

It's going to be about living more simply, making do with less, and learning to treasure things like family, friends, music played live in your living room, and homegrown tomatoes.

As for me? I've still got my old 500 mb iPod shuffle, and after that dies, I guess I'm back to reading books and doing the crossword on the train.

Kind of like people have been doing since train travel was invented.

Of Cursing and Candles

So I have been reading with much enthusiasm over the last few weeks the fire storm that has erupted on Raise the Hammer over the Stadium location issue. Invariably, there are 30, 40, at one point even 70 comments, with most comments being a variation on the theme "council is dysfunctional, throw the bums out."

Yet a quick look at The City of Hamilton web site shows an alarming number of seats in this fall's Civic Election that are still uncontested, and voter turnout in the 2006 election was 37%. Let me say that again. The direction of Hamilton's government, the city hall renovation issue, the parade of jobs out of our city, the Aerotropolis disaster in the making, and even the stadium location will all be presided over by a group of people who had the support of about 1/3 of Hamiltonians.

So what can one person do?

Well, here's something. As the saying goes, it's better to light a candle, than to curse the darkness, and here is a golden opportunity to light a whole bunch of candles. Hamilton Civic League is going door to door across Hamilton to ask regular everyday people what they think about their City. How it should be run, and what is important to them. Then...and this is the big then...this is the part that saw Guelph's 12 person-stuck-in-their-dysfunctional-ways council get tossed out on its ear...they are going to compare the voting records of each councilor to the values expressed by respondents to the survey. And they are going to publicize the heck out of that comparison. The media is on board, and raring to go, all they need is the data.

I often hear people say - "I don't vote, because it doesn't make a difference." Fred Eisenberger was elected by 452 votes. The really scary part, was that on my way to the polling station, I said to my partner, "I'm going to register a protest vote, and spoil my ballot or something, cause DiIanni's going to walk away with it again." Sure glad I didn't follow through on that stupid idea.

Similarly, if 453 people had said that night "oh, my vote doesn't count" and stayed home, we might still have Larry as Mayor, and the Aerotropolis would already be a done deal...and who knows what else.

So not only can you make a difference by voting, you can make a HUGE difference by helping your fellow Hamiltonians get engaged in the electoral process. What's it going to cost you? About an hour of walking around in the sunshine and getting to know your neighbors better. Hell, you should be paying them for the privilege. So click on the link , and fill in your volunteer form, and let Kim know you're good for an hour or so.

Because right now, they need over 100 volunteers, and they've got about 20. Unless you want the same 37% of voters deciding how this city is run in three months time, you'd better start moving. Online indignation is not enough. It's time for action.

Eat Local...really local.

So it’s Tuesday night, and it’s time to pick up the farm share from our CSA. Of course, we pick ours up at the actual farm itself, so I grabbed the keys and headed out to the door. Went straight for the car, and opened up the driver side…so I could fish out a couple of reusable bags. Then I closed the car door, locked it, and proceeded to head for the farm. A block away from my house on the corner of Peter and Pearl Streets in Strathcona.

While the local food craze has swept North America and has even trickled up to places as large as national grocery store chains, most still consider anything grown in Ontario to be local. Russ Ohrt at Backyard Harvest brings 'local' to a whole new level, taking his extensive farming experience and adapting it to the big city. He calls it "urban agriculture."

Most people who stop by Ohrt's yard are inspired by his “farm,” but some express a concern over the safety of the produce. Given Hamilton's industrial history and still-active smoke stacks not too far away, is it safe to eat something grown practically downtown? To Ohrt, it's a chicken and egg problem. Do we clean up all the pollution before we start growing our food this close to home? Or do we start growing our food right here so it requires less oil to produce it and bring it to market?

Ohrt's produce is grown without chemicals and is eaten fresh, preserving nutrition, decreasing chemical content and enhancing taste. And because pollution travels, it isn't just downtown farms that are affected by Hamilton's manufacturing sector. Between the agricultural spreading of bio solids, to your neighbor’s pesticides being carried on the wind, in an area as densely packed and filled with industry as Southern Ontario, who can tell?

While Ohrt's property is large for an urban yard, he has started his business, “Backyard Harvest,” to educate residents about urban agriculture and to access more space to grow. His clients include one family who had him design their garden and tend it, supplying them with fresh, ultra-local produce. In other cases, Ohrt simply leases land in the neighbourhood from individual property owners and harvests the vegetables for himself.

Besides the CSA, Orht has been selling his produce at the “Maker's Markets” around Hamilton's west end and at a roadside produce stand in front of his home, cleverly disguised as a garage sale. Russ is now up to 7 backyards in his ‘farm’, and with his table at the Maker’s Market selling out most weekends, he is on the lookout for more land to till.

It all feeds into the issue of Food Security in Hamilton and area. It’s commonly understood that every calorie of food that comes from a supermarket typically takes 12 calories of fossil fuels to create. Uber-local food that uses no pesticides, herbicides, diesel tractors or refrigerated transport trucks would seem to position Hamilton well for the changes to come.

And to those who say we could never grow enough to make a difference, I’m afraid history would disagree. During World War II, it’s estimated that 40% of the Vegetables on the average American’s table came from Victory Gardens. Yet we’ve come a long way from the government encouraging people to grow gardens out of patriotic duty, and Ohrt even wonders if we have retained enough of those skills. That’s why in our house, we have begun with four simple Square Foot Gardens to get us started. We’re now in our second year, and our veggie patch looks like a scene out of a John Wyndham novel…in the best way possible.

Perhaps the key to reskilling our society is for more people to just be willing to ‘give it a go’ now, before those skills become crucial.

And perhaps the key to weaning our dinner tables off of fossil fuels is to start right in our own backyard…or Apartment balcony, or even south facing window. The possibilities are only limited by your patience, courage, and selection of seeds.

If you're interested in learning more about Ohrt's ideas, including leasing your yard, or having him come to your yard to show you how to grow your own victory garden, you can contact him at 905-296-4479 or russohrt@yahoo.ca.

The original version of this article appeared in Fall 2009, in The Park Bench, Strathcona Community Council’s Newsletter. The information regarding food security and Peak Oil are recent additions.

Energy Security

I'm sure this will not be the only post generated today by Toronto's black out, but here's my two cents.

It has been noted in the Peak Oil community quite a bit that the coming scarcity of Fossil Fuels is going to cause uncertainty in power generation. For those who aren't aware, the majority of power in Ontario is produced by burning fossil fuels - so our grid is at the mercy of carbon availability. Much has been made also, of the aging grid and how much energy in terms of fossil fuels will be required in order to maintain it moving forward.
To wit:
A very rusted looking - and somewhat awkwardly located Hydro Tower href="
View Larger Map">
And what looks like an
View Larger Map">entire substation that looks about ready to crumble into rust.

I've been saying for years that if we were to get a day (week!) as hot as today, with the economy running on all cylinders, that brownouts would be inevitable. I expected, however, for them to come from lack of capacity, not from apparent breakdowns in the system. That's the funny thing about black swans, though, isn't it?

In the meantime, here are some lovely suggestions for staying cool without AC.

All of this is to say that we are going to have to get used to using less power - not replacing our current power supply with something 'more sustainable.' Part of me applauds Dalton McGuinty's efforts to wean us off fossil fules, the obvious question is - "If the grid can't handle the sunny day requirements of Ontario now - how is it going to handle 1000's of extra cars being plugged into the grid daily. It's not about 'replacing' - it's about reducing. And moving to a lifestyle that just makes do with less...an out of context problem, maybe, for those who continue to confuse 'standard of living' with quality of life.

Perhaps 250,000 people in the dark on the hottest day of the year will be a wake up call.
Here's hoping.