What Is The Most Contested Issue Regarding Outsourcing Of Manufacturing Or Services To Other Countries?
Posted by China Sourcing CommentatorJul 25
I want to find out what is the most contested issue today regarding outsourcing a process to other countries? A process for example: manufacturing of a product or providing a service. Could it be a) Quality, b) Security, or c) the effect on US economy? Do you have another issue?
I am conducting this study in order to narrow my research (thesis) and help my readers (US manufacturers) develop the most effective controls of outsourced practices. Your experience(s) are also welcomed.
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While this may not be what you are looking for, I feel that this is the most difficult issue in the outsourcing situation.
From working in the automotive manufacturing capital of the US, I believe the most hotly contested issue is definitely the problems that result here in the US when the jobs leave our country.
One factor that might be interesting for you to research would be in the automotive industry supply chain and its ripple effect on the economy as these jobs move out of the US.
Not only are the Big 3 (Ford, Chrysler, and GM) losing jobs, but the contracts they use with their suppliers are very unfair to the suppliers.
In the automotive manufacturing business, there is a beast known as the QS-9000 and TS:16949 Quality Control system that has been adopted by all 3 automotive manufacturers (Ford, GM, and Daimer-Chrysler). Their suppliers are in Tiers. Tier One manufacturers produced parts directly for one of the Big 3 customers. Tier Two suppliers manufacture parts that will be sold and assembled into a Tier One companies parts; Tier 3 makes parts for Tier Two and so on. In order for GM, Ford or Chrysler to be certified, the supply chain must only be supplied by those companies also certified. That can include a company with only one employee (if that supplier will produce something that is part of the automotive supply chain).
Their contracts are based on typically a several year agreement, and they suppliers are locked into manufacturing parts for so many years. However, the Big 3 can demand a price concession or lock in the rates for the duration of the contract, so the supplier ultimately ends up losing money. As a result, the supplier often cannot afford to stay in business. What happens when they lose a customer and the resulting orders? They lay off their workers.
What happens then is that suppliers here in the US refuse to continue negotiating for these contracts, take a financial loss, or either retool or go out of business. What results is that 3rd world countries then vie for these contracts.
Now you can see why Michigan’s economy is in such bad shape. Not only have we lost the jobs in the Big 3, but also the lower paying manufacturing jobs in the Tier 1, 2, and 3 suppliers. I’m not sure about the ripple effect, but our state’s economy has been largely focused on this industry to a high percentage of total jobs in our state.
I believe Henry Ford once stated that he decided to pay his workers a higher wage than all other industries because he realized that if his workers could afford the vehicles, he created a customer base.
Can you afford to pay 42K for a vehicle?
Here are few arguments I have heard:
1. quality: when a service is outsourced to country B, the quality of that service is not always as good as in country A that outsourced it. One example is tech support.
2. security: IT jobs outsourced may lead to less security, e.g. employees in B may leak private information from a database or even sell it.
3. effects on A’s economy. It creates unemployment.
4. it might lead to discrimination of people from B by people in A believing they are taking their jobs. This is especially the case if some people from B migrate to A.