Kevin Meyer, in his post "Accenture and Hindsight Consulting", pokes holes in the matter of fact statements made by Accenture in a recent article in Manufacturing News.
Kevin does a fine job of ticking off all of the reasons these Experts (Consultants and Business Advisors) were wrong or misplaced in their recommendations to pursue Offshore Outsourcing. Too many well intentioned businesses started "Offshore Outsourcing" based on trends and perceived cost savings, not neccessarily based on real cost savings or what was best for them. Now these same groups are advising some clients to move back, but is the damage already done?
I observed and fought from the inside while a major Fortune 500 company offshored part of its low volume medical business, twice! The first time they reversed the decision after spending millions of dollars. The second time they made the move and moved 33% back to a contract manuacturer in the US, because the international supplier had quality issues and 60% of the components were still coming from the US. A few years ago I jumped at the chance to help a business recover from Outsourcing. They had chased the lowest cost parts overseas and inadvertently shifted their business from manageable cash flow to tying cash up in Inventory that they didn't need or need at the time of purchase. If you are going to Outsource (domestically or internationally) do it right and with proper planning.
Offshore Outsourcing is just one Strategy in a host of Strategic Planning Projects to keep a company competitive and efficient, best to have a multi-tier approach before chasing the lowest cost part or service around the world.
Don't get me wrong there is absolutely nothing wrong with offshoring or outsourcing (domestically or internationally) the problems reside in trying to:
- tailor the data to sell the idea, or
- ignore the costs that remain behind, think overhead costs are a burden for everything that continues to be manufactured domestically, or
- ignore total landed costs to bring that low-cost product back to assemble and sell.
I loved Kevin Meyer pointedly poking holes in Accenture's revelation that Offshore Outsourcing has not worked. Well Duh, it hasn't and damage has been done to people, businesses, and the nature of competition that will not recover over night.
It is always best to take the time to map out your stategies visually, and you just might save yourself the problems associated with jumping into uncharted territory without accounting for the risks.
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MindMap
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