Outsourcing Reconsidered

April 11, 2005

Two reports redefine its manufacturing impact.

For the foreseeable future, the outsourcing of production and services promises to be around, as manufacturers continue to pursue cost savings and competitive advantages. However, two recent reports from respected business research firms suggest outsourcing may not live up to executives' expectations nor, as many believe, be the primary cause of U.S. manufacturing's shrinking profile.

"With an estimated half of all offshoring operations destined to fall short of expectations, companies are under increasing pressure to calculate the risks -- not merely the rewards -- that offshoring entails," asserts the Conference Board. A variety of missteps can sink offshoring, the moving of factories and service functions from the U.S. to foreign locations, says the New York-based business research group. These mistakes range from poor project management and inadequate communications to ill-conceived transition plans. "While many companies tend to focus on security risks, a whole host of other risks, both at home and abroad, loom large: reputation/brand, social responsibility, geopolitical, human capital, regulatory and legal," contends the Conference Board. "Any one of these can turn a once-attractive potential savings into a costly endeavor."

Meanwhile, outsourcing, offshoring and corporate restructuring are not the primary cause of a shrinking U.S. manufacturing base, asserts the Manufacturers Alliance/ MAPI, an Arlington, Va.-based business and public policy research group. A decline in the number of U.S. manufacturing plants is a result of fewer businesses opening in the U.S. rather than of U.S. jobs being moved abroad, says Daniel J. Meckstroth, the alliance's chief economist. The alliance's report notes that from 1999 through 2002, U.S.-based multinationals opened 246 facilities in foreign countries while the number of manufacturing plants in the U.S. declined by 20,000, a number that's remained relatively constant. The reasons for fewer factories being opened include excess capital investments during the 1990s and rising imports of manufactured goods. But Meckstroth also notes, "Lean manufacturing practices, Six Sigma programs . . . and just-in-time inventory management all reduce the need for total numbers of plants and employees."

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.