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The Problems Of Outsourcing

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May 24 2007 12:00am EDT

The Problems of Outsourcing

What made the iPod such a huge success? Simplicity, beauty, marketing -- yes, of course. But also, crucially, something much more mundane: when the iPod was first launched, and for some time thereafter, Apple pretty much had a stranglehold on the market for the little baby hard drives which were at the heart of its music player. As fast as Taiwan could make them, Cupertino would buy them -- which meant that Apple's rivals were simply unable to compete.

In today's outsourced world, companies are more than ever at the mercy of their suppliers. The smallest part, if it's irreplaceable enough, can derail an entire manufacturing process -- something which worked to Apple's favor in the case of the iPod, but which has also worked to its detriment in the past, as when IBM proved incapable of providing its G4 and G5 chips on time. And this dynamic isn't just at play in the technology industry: it's also very much alive in the world of jumbo jets.

One of the smallest and cheapest parts on The Boeing Co.'s 787 Dreamliner could become its Achilles' heel as the company considers production rates to meet growing demand.
The potential problem is a critical shortage of fasteners, which are used to hold airplane structures together. Tens of thousands are needed for each plane.

What's more, the main supplier of fasteners is Alcoa, which does kinda have bigger things on its mind right now...

(Via)

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