Outsourcing

I have owned many motor vehicles over the years. American, French, German, Chinese, British, Italian, and Japanese ones. My experience over half-a-century has been that vehicles made by Toyota are substantially more expensive than the others, but that their reliability and quality well justifies the additional expense.

In the twenty first century the concept of outsourcing is all the rage among manufacturing companies worldwide. When you outsource an item and then you later need to delete or change it, you don't have to worry about all the people who will suffer or get fired. People losing their homes, marriages falling apart, childhoods being destroyed, all because the primary bread winner's career has vanished. When you outsource you also don't need to be concerned about the economic consequences of your actions like severance payments, retraining, relocation, etc. Since these people don't work for your company their long-term pensions and health care become the problem of someone else. Under the system of outsourcing it is easy to begin thinking of all these workers as just machines without dreams, emotions, careers, or families. They don't work for your company, so you are insulated. Just like a bomber pilot is insulated from the death and destruction he is causing thousands of feet below.

Outsourcing can be positive for the profits of a manufacturing company, thus it tends to make managers look good. Just like with the boom and bust cycle in capitalist economies, when things are going good it is easy to get complacent and forget about the possible negative consequences of outsourcing.

When you choose to have an item produced for you by another company, rather than manufacturing it yourself, you have far less control over possible sloppiness, poor manufacturing processes, or subtle cost cutting. In good companies one has the very best of (read expensive) quality assurance staff traveling around trying to determine whether a particular supplier has any hidden manufacturing or personnel problems. In my career in manufacturing I have been a part of the process of wining and dining these traveling quality assurance people so that they don't waste too much time looking at one's own manufacturing. Good companies also perform regular incoming quality checks of items manufactured by other companies to make certain that they are well within agreed upon specifications.

The problem is that even with the finest of procedures you still are mostly flying blind when you have some other company do the work for you. If your own factories and your own loyal and dedicated people make an item, you are much more certain that the work was performed properly and that everything is up to specifications.

When you combine outsourcing with just-in-time (JIT) parts manufacturing and delivery you have a virtual ticking time bomb. The old rule of “Stuff Happens” eventually will bite you. The supplier himself can face sourcing problems of his own raw materials, he may be treating his people badly and might suffer worker slow downs, strikes, or even subtle sabotage, and transportation of the outsourced parts on their way to your factory can run into all sorts of problems including even simple things like bad weather.

Yes, outsourcing combined with JIT creates many subtle pressures for people at all stages of the process to take short cuts. Toyota is not the first company to find out what a high price must be paid when things do eventually go wrong, as they inevitably will.

-
-
-
-
-