Outsourcing: More Than They Bargained For
One of the problems with the outsourcing control and command model is the inability to oversee and maintain an organized structure of production. For example, Barry Lynn mentions how Dell outsourced many of their assembly lines to other international locations to the point that the “Dell logistician had to watch hundreds of potential bottlenecks around the world”. Unless this logistician has excellent eyesight that can stretch all the way across the world from his office or some company liaisons monitoring production in the various locations, it is virtually impossible to oversee any potential problems that may occur on the assembly line. So, if something goes wrong on the assembly line or in other departments at the international locations, it is going to be much more challenging to trace the cause of the malfunction. The problem is that the production lines are not centrally located as they use to be. Before, a company could travel to their accessible domestic location, fully investigate the affected departments, and successfully rectify the situation. Now, the divisions of labor for assembling products vary due to the location. A product may have to go to one destination to have certain information imprinted and then it may have to travel to several other international destinations in order to be assembled with other equipment. So, this decentralized structure of command and control is creating a dilemma because if certain items are missing from a particular product, the availability of the product is going to be limited because the company will have to return all of the defective products half way across the world in order to improve the quality of the product.
Furthermore, the process of inventory has transformed over the past few years and it may not be for the companies’ benefit. Lynn reveals how inventory is no longer thoroughly conducted as it should be. Lynn discusses how traditionally it would take companies 60-120 days to perform accurate and complete inventory. Now, the whole process takes a few days to complete. This may be resourceful for major corporations in regards to the conservation of time. However, if inventory is done by other companies there may be deficiencies or an overabundance of supplies. The inventory for supplies may not be as precise or exclusive, which creates a problem with supply and demand. If there are not enough supplies to manufacture a product, then the company may suffer financially and there will be no way to trace unaccounted for inventory because they have chosen to place that primary responsibility onto international companies. If the company desired to examine the inventory, it may take a great deal of time to receive the inventory because they would have to access their numerous international affiliates for all of their records.
Another problem is that the companies are in a marathon to obtain several countries, which creates longer and fluctuating links that are too difficult to monitor. The links of the command and control model may branch or diverge so far that there will be no way to examine where the catalyst to a departmental problem arouse. Lynn emphasizes how the corporations are so preoccupied with the competition to see who can be the economical and global patriarch, that they fail to realize that they have more on their plate than they can consume. If problems occur with the assembly line, then there are few significant domestic alternatives because most of the work is outsourced to overseas divisions. Also, no one will know who to contact to resolve the dilemma because the company did not take the initiatives to become more acquainted with the companies they were conducting business with or make an attempt to send domestic representatives to the international locations to perform surveillance of the assembly lines.
Finally, companies are becoming so impulsive with acquiring countries that they fail to develop more practical knowledge about the possible environmental and political risks they are exposing the stability of their company to. The country may offer a proposal that is inexpensive and productive, but the domestic corporation may not fully investigate the political or natural climate of the country. Lynn reveals how political instability and vulnerability to natural disasters in other countries may place companies into an economical setback that they never anticipated. For example, if there were a political revolution in China or Venezuela, then there would be difficulty to produce and receive a product. The political strife may cause people to concentrate more on alleviating the violence, rather than organizing a computer chip for Dell. So, the company may feel that they saved sufficient amounts of money for the manufacturing of their product, but their ability to access them may go down the drain, literally. If a disaster, whether political or natural should erupt, the whole operation could collapse to the point where it may be challenging to restore back to its original productivity.
One command and control model that is complex, but more organized is from Cadence Design Group. This company offers a software that creates manageable models. It has different branches, but it seems to be centrally located and accessible in case if any problem erupts. With this model the company can actively communciate with the various divisions and pinpoint any problem to a particular department. However, with the Hanu Software,the command and control model is contrasting. A majority of the organization's high level divisions such as the business and technical departments are located offshore. This professional arrangement may help to disperse and alleviate the work load, but it will be difficult to manage a crisis because the domestic management team cannot actively participate with investigating a particular problem. The domestic department may not even have the ability to access and monitor the other major departments. So, they may not have the exclusive knowledge of what is occurring in the company.
Everyone should take a look at Miss M's Blog post about the subject. She makes a very good point about the competition among the companies and how it makes the whole battle for the title of the "best" company much more enriching for several organizations. Also, Joy straight-forwardly reveals how the tables can turn on the companies who hold the belief that they are in power. Yet, little do they know of what could happen if they acquire too many companies and rely on too many international manufacturers.