[apologies for the rant but I live this every day]pickle wrote: Not trying to justify the outsourcing, just saying that with the amount of bureaucracy in these larger companies that it's often more efficient, under certain market conditions, to outsource. I think the liability discussions are a result of that arrangement, rather than a driving force behind it, but I could be wrong.
The two key arguments I hear most often for outsourcing from a large corporation are efficiency and specialization. I understand the point behind both of them.
For corporations, they are beholden to their investors (which usually includes a very heavily leveraged c-suite, so what makes the investors money makes the c-suite a ton of money). So when they say something is more efficient, they just mean it costs less. So my problem with this argument is, it is a cop-out.
The huge corporation has more resources than their OEMs and sub-contractors, and any bureaucracy is their own doing. If they wanted to do the job, they could find a way to do it for cheaper in house.
But the Supplier teams (called different things in different businesses) are not an impartial arbiter of what is good/bad. They need a bigger supply base and more OEMs and more widgets coming from outside the company, because that builds their empire within the big company. So, like they always says with statistics, you can tell any story you want. So they argue that they found a wonderful supplier that can do this for cheaper than we can, even when the component/sub-assembly/whatever is a key tenet of what it means to do your job.
On the specialization argument, the general sense is "we are in the XYZ business, not the ABC business" and you can fill in any big product with hundreds/thousands of parts in for XYZ, and some special part for ABC. The semiconductor shortage is a great example of this. GM would say they are in the car business, not the semiconductor business. Of course they have the capital to build a semiconductor plant and get good at it, but that is a huge undertaking and diverts resources away from where they want to spend (and of course from their C-suite's and investor's pockets, at least in the short term, and CEOs aren't usually around for more than 10 years so they don't think long-term anyway). So they find a key strategic partner to do that for them. I side with this argument a lot more than "it is cheaper to have someone else make our seats."
All of that said, I realize a lot of innovation happens at smaller suppliers. Most of that innovation is just "how can we make this thing cheaper" and not the cool innovation we all think of that created side air bags or anti-lock brakes. But some really great things comes from the smaller company having to do more with less. The issue I have is that always comes at the expense of the small company, as the big company keeps forcing that upon them, while they rake in more profits.