Consequences of excessive outsourcing

Job Security: The Unintended Consequences of Outsourcing

One of the most significant consequences of excessive outsourcing is the loss of job security for domestic workers. As companies increasingly outsource jobs to low-cost countries, many workers in developed countries are left with few options but to take on menial or low-paying jobs, or to retire early. This can lead to widespread unemployment and social unrest.

For example, in the United States, the rise of outsourcing has led to a decline in manufacturing jobs, as companies increasingly outsource production to countries with lower labor costs. According to the Bureau of Labor Statistics, manufacturing employment in the US has fallen by more than 6 million since 2000, and many of these jobs have been lost to outsourcing.

This trend is not limited to the United States, as similar declines in manufacturing employment have been observed in other developed countries, including the United Kingdom and Germany.

Quality Control: The Risks of Outsourcing for Quality Assurance

Another consequence of excessive outsourcing is the risk of quality control issues. When companies outsource jobs to low-cost countries, they often do so in the hopes of cutting costs and improving efficiency. However, this can come at the expense of quality assurance.

In many cases, workers in these countries may not have the same level of education or experience as those in developed countries, which can lead to mistakes and errors that can compromise the integrity of a product or service.

For example, in 2018, the drug maker Eli Lilly had to recall more than 5 million bottles of a popular diabetes medication after it was discovered that one of its manufacturing facilities in India had been producing the drug with an incorrect ingredient. The error led to several deaths and hundreds of hospitalizations in the US, highlighting the risks of outsourcing for quality control.

Similarly, in 2017, the automaker General Motors had to recall more than 1 million vehicles due to a faulty ignition system that was linked to at least 19 deaths. The defect was traced back to a supplier in Mexico, highlighting the risks of outsourcing for quality control.

Innovation: The Impact of Outsourcing on Creativity and Innovation

Excessive outsourcing can also have a negative impact on innovation. When companies outsource jobs to low-cost countries, they often do so in the hopes of tapping into a pool of cheap labor that can help them reduce costs and improve efficiency. However, this can lead to a lack of creativity and innovation, as workers are not given the same level of autonomy or control over their work.

For example, in 2018, the US technology company Duolingo had to shut down its Spanish language learning app in several countries after it was discovered that the app’s translations were not accurate and were often written in a slang-heavy style that did not accurately reflect the language. The error highlighted the challenges of outsourcing for innovation, as workers in low-cost countries may not have the same level of expertise or cultural knowledge as those in developed countries.

Solutions: Adopting a More Flexible Approach to Outsourcing and Focusing on Developing Local Talent

To avoid the negative consequences of excessive outsourcing, companies can adopt a more flexible approach to outsourcing and focus on developing local talent. This approach involves identifying the jobs that are best suited for outsourcing and those that should be kept in-house, based on factors such as the level of skill required, the need for cultural sensitivity, and the importance of innovation.

Companies can also invest in training programs for their employees and suppliers to improve their skills and knowledge, making them more valuable assets to the company. This approach not only helps to ensure that the work is done to a high standard but also creates a pool of local talent that can be leveraged for future projects.

Another solution is to build strong relationships with suppliers in the same country, which can help to ensure that the quality of the work is maintained and that any issues are addressed quickly. This approach involves working closely with suppliers to understand their capabilities, challenges, and needs, and developing a partnership based on mutual trust and respect.

Real-life Examples: Eli Lilly and General Motors

The examples of Eli Lilly and General Motors illustrate the risks of excessive outsourcing for quality control and innovation. Both companies faced significant problems due to defects that were traced back to suppliers in low-cost countries, leading to recalls and damage to their reputations.

FAQs

1. What are the consequences of excessive outsourcing?

Excessive outsourcing can lead to job security issues, quality control problems, and innovation challenges.

2. How can companies avoid these negative consequences?

Companies can avoid negative consequences by adopting a more flexible approach to outsourcing, focusing on developing local talent, and building strong relationships with suppliers in the same country.

3. What are some real-life examples of excessive outsourcing?

Examples include the drug maker Eli Lilly’s recall of several million bottles of a popular diabetes medication due to an incorrect ingredient and the automaker General Motors’ recall of more than 1 million vehicles due to a faulty ignition system.

4. How can companies build stronger, more resilient supply chains?

Companies can build stronger, more resilient supply chains by adopting a more flexible approach to outsourcing and focusing on developing local talent and building strong relationships with suppliers in the same country.