Tuesday, January 29, 2008

Economic Treason 101: QuicKutz To Close Plant In Orem, Utah And Outsource Production To Mexico

On January 29th, 2008, the Provo Daily Herald reports that QuicKutz, an Orem scrapbooking supplies company, is planning to outsource its manufacturing overseas -- a move that will result in layoffs and the closure of its 53-worker die-cutting plant in Orem, company officials said Monday. According to a filing Friday January 26th with the Utah Department of Workforce Services, the company said it is outsourcing its production to Mexico.

The layoffs, which were announced to QuicKutz workers on Thursday, will be done in phases over the next three months. The 25,000-square-foot, die-making plant opened in Orem in 2004.

Erik Adams, president of QuicKutz, couldn't immediately provide a final figure on the number of manufacturing, packaging and assembly workers to be terminated. But he said the company is trying to keep as many of those workers as possible, and may relocate between 10 and 20 of them to its shipping and fulfilment center in Lindon. Founded in 2001, the company currently has a total of 112 workers.

Although no severance will be paid to the affected workers, they will be eligible for certain public benefits. Under the U.S. Department of Labor's Trade Adjustment Assistance program, U.S. workers dislocated by foreign trade are eligible to receive unemployment benefits, retraining and job-placement services. The Workforce Services's Dislocated Worker Unit or Rapid Response team will provide a workshop for affected workers by the end of February or early March, according to Curt Stewart, a spokesman for Workforce Services.

"The decision to close our die plant has been particularly difficult. We looked at a number of other options, but none were viable. To be competitive in our current marketplace, we are required to be more nimble and responsive to market trends. We feel that this change in strategy will give us that competitive edge," Erik Adams said.

Staying competitive has become more critical due to the economic slowdown, which in turn caused more consumers to cut back on discretionary purchases, Adams said. "We'll be sourcing our production from about 10 factories overseas. This move will give us 10 to 20 times more production capacity than we currently have and enable us to lower prices significantly and move from being a manufacturer to a distributor. We're already sourcing digital die-cutters like the Silhouette from overseas because the technology is not within our plant", Adams concluded.

QuicKutz, which retails more than 500 shapes and 20 alphabets of different sizes and styles, has been outsourcing a small part of its die-manufacturing to vendors overseas for the past few years. Outsourcing occurs when a U.S. company takes an in-house function such as research, call center or manufacturing, and has another company perform that same function and then reintegrates its work back into its overall operations.

QuicKutz was founded by Natasha Hixon, her husband, Mark, and business partner, Eric Ruff. Ruff is chief executive of QuicKutz and also founder of PowerQuest Corp., a data-storage and backup security software company that was sold for $150 million to Symantec Corp. in 2003.

This is the second outsourcing of a plant in the Utah Valley of which I'm aware. On October 16th, 2007, Novell announced plans to outsource 200 Provo jobs to Bangalore, India.

If you want to let QuicKutz know how you feel about them stealing jobs from Americans and giving them to Mexicans, here are two ways to communicate with them:

(1). By e-mail:

Customer Service: customerservice@quickutz.com

(2). Post a comment on their latest blog post.

Please keep responses reasonably civil; no "f-bombs". But use of words like "treason" and "traitor" would be quite appropriate, though.

Commentary: Outsourcing (offshoring) is not always the panacea it's advertised to be. Many companies have visions of 80% production cost savings, but after they actually do it, they find their savings may be 20% or even less. A September 2003 article entitled "The Hidden Costs of Offshore Outsourcing" outlines six different costs not always correctly anticipated. They include the cost of selecting a vendor, the cost of transition, the cost of layoffs back home, the cultural cost, the cost of ramping up, and the cost of managing an offshore contract. While written from the perspective of an IT operation, it can apply to varying degrees to any offshore outsourcing operation.

And as far as I'm concerned, if it goes wrong, the company's getting its just desserts. It's one thing to relocate a plant from one area of the United States to the other; there's still an incentive for the worker to follow the job, knowing he'll still earn an American level wage. However, when a plant is relocated outside the United States, it is not convenient for American workers to follow the jobs. In addition, if the company is paying Third World wages, the American worker cannot afford to take the job.

And this reveals the underlying fallacy of globalization - it is impossible for Americans to compete directly with Third World workers for employment. As a result, American workers cannot possibly benefit from globalization. Yes, product prices may be lower, but an American worker without a job cannot afford the products at any price. This illustrates how the American economy, once relatively balanced between capital and labor, has become grossly distorted in favor of capital - unless you're lucky enough to have just accidentally chosen a skill that society arbitrarily values highly at a given moment, or if you're an entrepreneurial acrobat. We have created a superstar winner-take-all economy that offers nothing to the American working class except volatility and uncertainty.

And exporting so much of our production sector endangers America's sovereignty. What happens if get into a war against a country that makes a certain type of widget that we need to fight the war? That widget suddenly becomes unavailable.

The only saving grace to QuicKutz's outsourcing is that it's taking place in Utah, which has the most prosperous economy and the lowest unemployment rate in the country. If you can walk and chew gum simultaneously, and are not a child molestor, you can get a job in Utah. So the laid-off workers shouldn't have much of a problem finding new employment, particularly with the transition assistance proffered.

But exporting American jobs outside the United States is still tantamount to economic treason, as far as I'm concerned.


BeckyChabot said...

This is a sad situation, it's happening to many US businesses. The only way to stop is to remember on voting day! 1. Stop over regulating and over taxing our businesses so they can afford to stay within the USA. 2. Review Foreign Trade and the imbalance of import/export taxes, if it's cheaper to outsource, then don't offer such import tax breaks for those imports from foreign countries that take our labor jobs. Other countries require high tariffs to import USA goods.

Karin said...

Just found the following statement from QuicKutz.

"We are aware that there is a good deal of misinformation in the newspaper and on the Internet, including inaccurate details regarding where QuicKutz intends to source products in the future.

QuicKutz has announced that it will restructure its operations. That is all. As part of the restructuring, it will try to focus its efforts on the things it does best - as every company obviously must do. Some of the things we offer to our customers are created by our own employees in the United States, and will continue to be. Some of the things we offer are created by others who can do it better, in the United States and elsewhere, and will continue to be.

QuicKutz has no immediate plans to purchase products from any new suppliers in Mexico, China, India, or anywhere else. It has not announced that it will lay off large numbers of employees. In fact, not a single worker has been laid off in connection with the restructuring. QuicKutz has always been very good to its employees, consistently providing a superior work environment, assisting employees through changes, and regularly "sharing the wealth." There are no plans to change any of this in the future. If QuicKutz can remain healthy and continue to grow, it will be able to hire additional employees here in the United States.

In the short term, that may present some internal challenges, but its customers will enjoy the same high product quality they have come to expect, superior customer service, and eventually an enhancement of QuicKutz's ability to deliver.

QuicKutz will strive to align itself so as to be able to offer the highest quality products to its customers at the best possible value. Our mission is to enable creativity by providing intuitive innovative products that customers enjoy.

Thank you,

Brian Hubler

Customer Service Manager

QuicKutz, Inc. "

Anonymous said...

LoL. What a joke from Brian! Sharing the Wealth haha funny.
The last day of work is march 12th