The long-term considerations with outsourcing

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Thinking long-term about outsourcing

When considering outsourcing it is important to consider the long-term. Outsourcing is not something that you can easily start and revert. It takes time to establish relationships – and should not be a decision that you take lightly. As explored below, while there are many potential savings that come with outsourcing, there are also long-term risks associated with the approach.

Will you loose the capability to manufacture?

One of the first long-term considerations with outsourcing is whether it will impact your internal capabilities. By outsourcing the activities, you may start to lose the ability to perform the activity internally. Over time the knowledge associated with performing the activity internally get lost – gradually making it more and more difficult to return the activity in-house should at a later point you decide you want to.

What will be the knock-on consequences to your research and development?

Another long-term consideration with outsourcing is whether it will have further knock-on impacts on other parts of the business. Not having the insight into the manufacturing operations may make it harder to make product developments, especially in areas that require close connections to the manufacturing operations. Changes to the materials or other production processes may become more difficult when manufacturing is outsourced to a different firm. 

Will you create a competitor?

Another concern when considering the long-term consequences of outsourcing is whether it could result in creating a new competitor. Outsourced companies may gradually build up the skills and knowledge within your area of operations such that long term it is possible that your supplier may enter your industry. 

Final thoughts: Change can happen slowly, but don't loose sight of the big picture

When considering the consequences of outsourcing, remember that change can occur slowly. you may not realize that it is starting gradually hollow-out your firm until it is too late. It is important to be aware in advance of the long-term consequences of outsourcing and to ensure that decisions that may make sense in the short term don’t come back to cause issues later. 

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