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Has outsourcing gone too far?
When it comes to the ownership of manufacturing assets, conventional thinking argues that less is more. But in the ensuing rush to outsource them, many companies are missing greater opportunities to capture value and improve performance. Executives should deal with the "make-or-buy" problem in the context of long-term strategy, not short-term savings. They must weigh the full costs (and potential for improvement) of their current operations against the true—and usually underestimated—costs and challenges of managing a supply chain. This is rarely a simple calculation.
The take-away: Outsourcing can deliver game-changing value, but it can also bring turmoil. It is best viewed not as an end in itself, undertaken through a leap of blind faith, but as a tool to boost performance through a rational assessment of the possibilities.
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© 1992-2003 McKinsey & Company, Inc
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