What Happens When You Outsource Too Much Harvard Case Solution & Analysis

In industry after industry, managers are taking deliberate steps to separate their value chains and shifting the important activities and functions to external suppliers. But what happens when companies become too dependent on external suppliers and give them too much control when they do not have the same degree of understanding and awareness of how important product or service elements fit together, and what you need? How can they go about restoring critical internal levers? These questions have arisen in the course of long-term research project studying nutrition strategies related to new product development in the major European car companies. In the late 1980s, the company-the authors call it Alpha had direct communication power with more than 3,000 suppliers, most of which are small companies that have been involved in the production of components. In the early 1990s, however, the administration began shifting more and more design work and engineering suppliers, and this trend has been accelerated proliferation of electronics in automobiles. By the mid-1990s, Alpha has outsourced the development of complex systems, such as panels, seats and safety systems. Alpha management hopes to increase flexibility, reduce time and reduce costs while improving product quality. But as internal engineering groups were less and less aware of specific design and technical issues, the problems encountered with the integration of systems and making decisions about trade-offs. The article discusses the difference between physical systems integration and integration performance of such systems. The authors found that the successful development of new products depends on three main factors: the component-specific knowledge, learning by doing, as well as technological innovation. The modular architecture of the product will make sense to deal with the physical integration, but it is not adequate to address performance issues. "Hide
by Francesco Zirpoli, Markus Becker Source: MIT Sloan Management Review 8 pages. Publication Date: January 1, 2011. Prod. #: SMR374-PDF-ENG

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