basictraining
BY ART VAN BODEGRAVEN AND
KENNETH B. ACKERMAN
Is night falling or is dawn about
to break?
THE U.K.’S THE ECONOMIST FEATURED AN OPINION COLUMN
last summer on “The trouble with outsourcing.” When The
Economist, arguably the best newspaper (their term) or news magazine in the world, speaks, we listen.
Recognizing that outsourcing (offshored and otherwise) has transformed the global economy, they nonetheless questioned how long
the boom can last and whether the practice is actually useful.
One telling citation was a report of an upswing in legal disputes
over outsourcing. Their prime example involved IT services, but our
experience is that there are more than enough lawsuits involving
logistics and supply chain services to keep several graduating classes
of new lawyers happy. Our involvements in the
United States have primarily been with mutually
unhappy logistics service providers (LSPs) and
their customers.
But there are examples—some stunning—of failures involving sourcing and procurement decisions
and the performance of manufacturing suppliers.
Their reference to Boeing’s well-publicized problems with 787 Dreamliner components not being
delivered on time and not fitting together is factually correct. But the fault may lie more with sales and
marketing decisions than with supply chain-driven
outsourcing selections. That is, some say, because
sourcing components from places around the planet that would be prime markets for sales of the finished product could
have been a powerful sales incentive to would-be buyers.
Whatever, the legal alternative is not fun, costs fortunes, takes
amazing amounts of time, and does not always satisfy either party.
And that’s only here in the United States. In other parts of the world,
legal systems may not work at all. In yet others, the machinations of
courts have been charitably described as “Dickensian.”
MORE BAD NEWS
One respected industry researcher and analyst reports that the average outsourcing contract’s value has dropped by nearly 20 percent,
with the United States’ precipitous decline dragging down the global
average. The same firm suspects that outsourcing may be approaching a saturation point—what can be spun off to others already has
been, at this point.
We happen to disagree, but a few examples illustrate why some might
think so. In the U.K. economy, one of the world’s most mature, 10 per-
cent of the workforce is engaged in outsourced
jobs—and that doesn’t include those jobs that
have been outsourced “offshore” to Asia or
Central/Eastern Europe. The United States
employs more outsourced contract workers in
Afghanistan than it does active military personnel.
BAD STUFF HAPPENS—WHY?
As we’ve seen, outsourcing can go colorfully, even
spectacularly, wrong. When it does, it can be really tough to unscramble the eggs. Maybe the former department involved has been made redundant, as our U.K. cousins like to say.
