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February 8, 2011
Too Much Outsourcing: Has the Line Been Crossed?
We've talked a lot about outsourcing on this blog, since it's been one of the biggest features of life in this industry over the last few years.
It's not hard to see why. Costs. We spend too much money finding drugs (which don't always make it back even when they succeed). Anything that cuts costs more than it cuts productivity is going to be tried.
But any idea can be taken too far. Here's Boeing's current CEO, talking about the cost overruns on the 787 Dreamliner project, and how they were made worse by overzealous outsourcing:
. . .the 787's global outsourcing strategy — specifically intended to slash Boeing's costs — backfired completely.
"We spent a lot more money in trying to recover than we ever would have spent if we'd tried to keep the key technologies closer to home," Albaugh told his large audience of students and faculty.
Boeing was forced to compensate, support or buy out the partners it brought in to share the cost of the new jet's development, and now bears the brunt of additional costs due to the delays.
Read the whole article; it's extremely interesting, and especially so for those of us in the drug industry. There was a Boeing employee who specifically criticized this process some years ago, and the whole return-on-net-assets view of the business world, and the company seems (belatedly) to be giving him his due. His line about how the biggest return would come from having someone else build the plane and then slapping a tiny Boeing decal on the nose is funny, but in a painful way.
So here's the question: have companies in our industry reached this point? And if so, which ones? Reports like this one make me think that some organizations have crossed that invisible line, and will regret it. I think that "zero outsourcing" is probably a bad idea. But "way too much outsourcing" could be worse. . .
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