Outsourcing Too Much Part II
Posted by Pete McBreen 08 Feb 2011 at 13:02
To follow on the outsourcing saga, the Seattle Times reported that 10 years later Boeing is finally listening to John Hart-Smith. Note that that PDF link is covered in BOEING PROPRIETARY labels.
One interesting item from my viewpoint is that it took 10 years for the warnings to be heeded, so there are echoes of the climate change issue there.
TL;DR Fourteen pages later …
Although John Hart-Smith’s paper deserves to be read in full, I know few people will, so here are some key excerpts.
Almost all potential suppliers indicated a preference for being subcontractors rather than risk-sharing “partners’. Could they have known more about maximizing profits, minimizing risk, etc. than the prime manufacturer who sought their help?
One must ask the question as to where the skills for writing such specifications will come from if there is no continued in-house production from which to learn.
Outsourcing the generation and distribution of a company’s proprietary intellectual data would seem fraught with opportunities for potential customers to acquire the knowledge they need elsewhere.
The inherent difficulty with such an approach to business is the need to retain and develop the technical skills needed to develop future products. … One must be able to contribute in some way to products one sells to avoid becoming merely a retailer of other people’s products.
The paper does discuss some situations whereby outsourcing is useful. On a personal level this is useful because I do a lot of contract software development, so whenever I am working, my client is in effect outsourcing the work.
It is accepted that prime manufacturers cannot afford to have expensive facilities that are under utilized, even if it would save on downstream rework. It really is better to out-source such work, IF AND ONLY IF the selected supplier has excess capacity on such equipment.
In the software world, this equates to contracting for work that is done infrequently, when the skills necessary are not needed on a constant basis. It is also useful to contract in skills that are to be passed on to the in-house employees, so that the contractor comes in, sets up particular processes/machines and then trains the other staff in how to maintain and use them on a regular basis.