When Outsourcing is CLEARLY Not in Your Long Term Interests

Wednesday, October 8, 2008 23:03
Posted in category From the Factory Floor

The scenario is always the same.

An executive team is in China assessing the opportunities for China based manufacturing.  they want to meet potential partners, understand the environment, see what the conditions on the ground are, etc.

They have heard from others, and seen in the media (blogs inlcuded), that China can save them money… and for them All Roads Lead to China

But, there are times when as a consultant in China you have to say NO.  That the worst possible move they could make would be to outsource their product to China (or anywhere for that matter) as either the volumes are not there, or the price points are not feasible, or they simply have one of those products that has no hands on it at all and the risk that would be injected into the system vs. the gains are to great.

The Businessweek story Dangerous Fakes presents a very timely article on how outsourcing critical parts to military equipment can have long term consequences that were not thought of.

Personally, I am floored at times by how far people will go to save a buck.

Computer chips for the latest fighters and routers used in military networks are exactly the items that countries should not be outsourcing to anyone, let alone bringing in distributors who:

Hakimuddin says she knows little about the parts she has bought and sold. She started her business by signing up on the Internet for a government supplier code. After the Defense Dept. approved her application, with no inspection, she began scanning online military procurement requests. She plugged part codes into Google  and found Web sites offering low prices.

Then she ordered parts and had them shipped directly to military depots. “I wouldn’t know what [the parts] were before I’d order them,” she says, standing near her front door. “I didn’t even know what the parts were for.”

Amazing.  After the last 8 years of listening to my own president speak about how security is the country’s number 1 issue, it all comes down to this one person who by her own admission doesn’t know the first thing about the product she is buying or the suppliers she is finding.

What was the process here?  Didn’t anyone think that these components may be of a higher level of protocol to find domestic manufacturers or at the very least find a factory direct source?

Case closed: these items should have never been outsourced.

Perhaps an extreme case, what I hope this example highlights is that (1) companies/ countries should not outsource items that are critical to their ongoing concern, (2) that if they do, they should make sure the right people are in place to manage the process, (3) that there needs to be a process

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