Outsourcing's Next Steps

June 11, 2006
New ideas and better practices make the increasingly difficult job of managing a dynamic supply chain easier. When it's best not to chase cheap labor.

Almost from manufacturing's earliest days, the choice between making and buying has existed. The difference now is that buying is big business, a huge business in the many billions of U.S. dollars, and a global business as well. Outsourcing is not limited to buying components from suppliers down the block or in nearby cities or states. U.S. manufacturers are getting components from suppliers -- sometimes from their own foreign facilities -- in the rest of the Americas, in Europe and in Asia, most famously in China, through a practice known as offshoring.

But as domestic outsourcing and offshoring continue to expand, becoming more diverse in terms of products and locations, managing a dynamic supply chain becomes more difficult. Indeed, some manufacturers are turning to third-party vendors -- essentially outsourcing the management of outsourcing -- to help them overcome quality-assurance and extended-lead-time problems associated with global sourcing. Meanwhile, Hewlett-Packard Co. is offering enterprise-wide management over major business processes, in ways that go far beyond outsourced IT. And while lower wage rates in such places as China and India continue to drive decisions about where to locate production, cheap labor isn't all that should figure into plant siting.

In the stories below, with information you can put to work right now, IW takes a look in depth at these issues.

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