Astute Planning, Flawless Execution,
Delighted Customers

Issue #149

Tuesday, May 19 , 2009

Accountability in Outsourcing and Offshoring
By Craig Bailey

During a recent visit to a new client, the topic of outsourcing/offshoring a segment of their manufacturing operations came up. Outsourcing, of course, can be a viable option to reduce costs as well as ensure that your precious internal resources remain focused on core competencies. Too often, however, people forget that outsourcing isn't an escape from accountability to product and service quality. While they may intellectually know this, the actual methods for "maintaining" that accountability are often lacking. Consider the following scenarios.

In the recent past, it was discovered that toys manufactured in China contained lead paint. US-based manufacturers have long since known of the toxic nature of lead and it has been eliminated as an ingredient to virtually all products. So, how did this happen?

Well, the responsibility of "who does what" for the manufacturing of toys was handed to a Chinese firm or firms. The toys were subsequently manufactured (at what you'd imagine to be a significantly lower price than "onshore") and shipped around the world only to be discovered "too late" that the toxic toys were in the hands (and mouths) of children. Who is accountable? I assume that you would agree that it is the toy companies that did the off-shoring of their manufacturing operations. And, it cost them…

More recently, the phenomena of "Chinese sheetrock" has emerged as what may be the next radon and toxic mold scare. If you haven't read about it, check out this online summary article. You can learn more by googling "Chinese Drywall." Same question: Who is accountable? My opinion is that the companies who acquired the tainted materials from the Chinese manufacturing firms are solely accountable and I'm sure that this will soon be worked out with the legal proceedings that are underway.

The moral of the story is that when we get caught up in the frenzy of lowering costs by outsourcing / offshoring (transferring the responsibility for "who does what") we must not lose sight of the importance of our accountability to the outcome (what is done). When we fail to recognize this, it can ultimately cost significantly more to recover than the savings that we initially reaped from the offshore arrangement.

In a nutshell, while firms are looking at every possible way to cut costs, assigning responsibility for manufacturing or service delivery to an outsourcer (on or offshore) doest NOT relinquish you from the ACCOUNTABILITY for the results or outcomes of what they ultimately deliver to you and your customer. You need to be just as involved, if not more so, in the overall inspection of quality and performance of these firms as you are with your own internal resources.



+ Be Careful What You Measure


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