In 2013, outsourcing grew yet again. But growth alone is not the full measure of success. While there has been more and more money in outsourcing, there were also big mistakes made last year. 2013 was marred by the biggest industrial disasters in outsourcing history, after a building collapse and a massive factory fire. In the UK, they had an inexplicable failure of their supply chains, when pre-packaged (and outsourced) supermarket foods turned out to have replaced beef with horsemeat.
In the US, industrial waste products from the Canadian oil industry, has been moved into cheap land near downtown Detroit, where outsourced firms are managing a growing pile of questionable chemical byproducts.
If you are going to set up a partnership with an outsourcer, it can be a responsibly run program. But when you have a long supply chain, you may not originally intend it, but over time you lose control and responsibility for the processes that produce your products. Some clients may have intentionally created long supply chains to separate themselves from the responsibility for he “downside” of their products. If you take a profitable product, and then find a way to transfer the risk and “downside” to someone else, then you can have a super profitable product. And we saw too many examples of that in 2013.
Before the Rana Plaza building in Bangladesh collapsed and killed over a thousand workers, there were cracks in the foundation of the building, the space was over crowded (even by Bangladesh standards), and the building shook from the vibration of the heavy equipment the building was not designed to support.
These conditions looked unsafe to the workers, who had complained to management, but US and European clients said that they were unaware of the work conditions. In the clothing business, which has been outsourcing for 50 years, it is difficult to imagine that billion-dollar corporations could be so ignorant of the work conditions. If it is true, then it points to the inherent problems when you combine “total outsourcing” with long supply chains.
After Bangladesh, there isn't too much farther you can go, nor is there a much lower price to be found in a yet more distant country. There is a growing feeling that the value of the farthest outsourcing destinations are beginning to lose their value. The greater control over a product, and the resulting benefits, may more than offset the difference between onshore and offshore outsourcing. The benefit of outsourcing just one more mile away, may have finally reached an end. There is no cheaper place on earth to outsource…. Or there just isn't enough of a financial incentive to keep moving farther away.
In 2014 expect to see the most farsighted companies shorten their supply chains, and look at more near shore and onshore outsourcing. There are legitimate reasons for outsourcing to the farthest locations on the earth, but there’s never a good reason to say that you don’t know how your products are built or how workers are treated no matter how far away they work!
In the US, industrial waste products from the Canadian oil industry, has been moved into cheap land near downtown Detroit, where outsourced firms are managing a growing pile of questionable chemical byproducts.
If you are going to set up a partnership with an outsourcer, it can be a responsibly run program. But when you have a long supply chain, you may not originally intend it, but over time you lose control and responsibility for the processes that produce your products. Some clients may have intentionally created long supply chains to separate themselves from the responsibility for he “downside” of their products. If you take a profitable product, and then find a way to transfer the risk and “downside” to someone else, then you can have a super profitable product. And we saw too many examples of that in 2013.
Before the Rana Plaza building in Bangladesh collapsed and killed over a thousand workers, there were cracks in the foundation of the building, the space was over crowded (even by Bangladesh standards), and the building shook from the vibration of the heavy equipment the building was not designed to support.
These conditions looked unsafe to the workers, who had complained to management, but US and European clients said that they were unaware of the work conditions. In the clothing business, which has been outsourcing for 50 years, it is difficult to imagine that billion-dollar corporations could be so ignorant of the work conditions. If it is true, then it points to the inherent problems when you combine “total outsourcing” with long supply chains.
After Bangladesh, there isn't too much farther you can go, nor is there a much lower price to be found in a yet more distant country. There is a growing feeling that the value of the farthest outsourcing destinations are beginning to lose their value. The greater control over a product, and the resulting benefits, may more than offset the difference between onshore and offshore outsourcing. The benefit of outsourcing just one more mile away, may have finally reached an end. There is no cheaper place on earth to outsource…. Or there just isn't enough of a financial incentive to keep moving farther away.
In 2014 expect to see the most farsighted companies shorten their supply chains, and look at more near shore and onshore outsourcing. There are legitimate reasons for outsourcing to the farthest locations on the earth, but there’s never a good reason to say that you don’t know how your products are built or how workers are treated no matter how far away they work!