ABSTRACT
During the 1940s and 1950s, the largest component of the cost of goods sold was labor. In some companies this cost was around 50%. This led to the Taylor labor movement and the focus on labor productivity. The labor focus gave rise to our cost accounting methods where overhead is typically spread based on the production labor hours. For almost 50 years, management has focused on the shop floor and how labor efficiencies can be improved. North American managers continue to search for inexpensive offshore labor even though labor is now less than 10% of the current cost of goods sold. Asian and European managers have begun to develop strategic sourcing agreements that move production closer to the market. One only needs to look as far as the automotive and consumer electronic industries to discover a large number of foreign-owned plants in North America.
