The ART Of Business

The Outsourcing Illusion

The timid death of the "Anti-Outsourcing Bill" in the U.S. Senate this week reminds us of the complete lack of comprehension by so many when it comes to the issue.

As the current political season heats up, our TVs are awash in commercials slamming one candidate after another for the jobs they allowed to be outsourced from the U.S. to lower-wage markets.

And while much of the rhetoric on Capitol Hill and in campaign advertising puts the blame for outsourced jobs on greedy companies and their political allies, a fundamental point is missed.

It is this: a large amount of the outsourcing of jobs from the U.S. is NOT due to corporate greed or avarice, but more to corporate incompetence and bad strategy.

What is forcing thousands of companies to close U.S. operations and lay off workers is an imbalance in the sales and distribution model that has evolved over the past four decades.

Product and service distribution has been turned on its head as distributors have wrested control of the strategic prerogatives of manufacturers in order to capture a disproportionate share of the supplying company's products and services.

The Mega distributors end up profiting at the expense of their vendors, and manufacturers earn little or nothing on the sale of their products and services.

As a result, U.S. companies have compulsively embraced outsourcing not so much as a result of their internally generated goals and objectives, but rather as a necessary response to the demands of sheer corporate survival; driven often by stupid business decisions.

And there is no legislation I know of to protect against that

TAGS: Supply Chain
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