A Nation of Marketers and Burger Flippers?

I'll bet I'm not alone when I say the problems Boeing is experiencing due to its radical manufacturing outsourcing policies were wholly predictable. (See "What's Causing Huge Delays for the Boeing 787 Dreamliner.")

That case is noteworthy because it marks a trend toward the almost total outsourcing of a very complex, expensive and highly engineered product. This should be a source of concern for engineers and skilled assembly operators who are currently working in the dwindling U.S. manufacturing base. The outsourcing of an advanced new civilian aerospace project is a signal that no segment of domestic U.S. manufacturing is secure.

Aggressive outsourcing policies reveal an attitude that the production and engineering of critical parts and assemblies are commoditized activities that could be done by anyone, anywhere, with no loss of quality to the end users. However, recent high-profile cases indicate that quality problems frequently arise with outsourced products, and that those problems can be legally and financially significant. Outrageous product failures such as poison-laced baby toys and acid-leaching drywall are driving an increasing consumer awareness of the quality problems associated with cheap manufacturing.

In fact, manufacturing outsourcing virtually guarantees that product quality and delivery will be adversely impacted. That is because manufacturing operations are where corporations actually create tangible value (i.e., useful things that people want to buy). Disrupting these centers of value creation by moving them to faraway locations destroys the accumulated experience and best practices of the incumbent staff (to say nothing of ending their source of employment). It also disrupts the clarity and flow of crucial information, restricts the ability to quickly solve problems, and creates logistical barriers. As the nature of the manufacturing activity climbs the technology curve, from the simple to the complex, these problems become amplified. There is no more direct influence on the quality of a product than the people and facilities that design and build that product, and no amount of clever "brand management" can conceal fundamentally bad (or dangerous) products.

Despite this, corporations cannot be expected to limit outsourcing on altruistic grounds. The only way manufacturing jobs will remain in the U.S. is if retaining those jobs makes sense from a business perspective. There are signs of progress: Boeing is bringing many critical production processes for the Dreamliner back under its direct control. Also, General Electric CEO Jeffrey Immelt recently delivered a speech in which he plainly stated that the rush to outsource manufacturing was "flat wrong," and that we have "lost sight of the core competencies of a successful modern economy."

There will likely always be a place for some rational level of outsourced manufacturing. However, sending away our best jobs and know-how is a bad idea all around. Otherwise, we are on a path to becoming a nation of marketers and burger flippers. We need to re-examine the rush to outsource for the sake of shaving a couple dollars off the register receipt. It might really be costing us.