What Happens When You Outsource Too Much? Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

In industry after industry, managers have taken deliberate steps to divide their value chains and transfer external providers functions as well as significant actions. But what happens when firms become too dependent on external providers and cede them too much control when they lack the exact same level of comprehension and knowledge about how important merchandise or service parts fit together and what is required? About reestablishing critical internal levers how can they go? These questions appeared during a multiyear research project analyzing supply strategy relating to new product development at a major European automotive business.

In the late 1980s, the firm -the writers call it Alpha -had direct supply relationships with more than 3,000 suppliers, most of them small-scale companies that were involved in part generation. In the early 1990s, nevertheless, management began shifting increasing levels to suppliers of engineering and design work -a trend which was hastened by the proliferation of electronic equipment in cars. By the mid-1990s, Alpha started to outsource the design of complete systems, including dashboards, seats and security systems. Cut development costs while enhancing product quality, reduce lead times and alpha Software direction expected to increase flexibility. The article analyzes the difference between integrating the performance of such systems and incorporating physical systems. The authors found that successful new product development depends on three major variables: component-specific knowledge; learning by doing; and technological renewal. Modular product design may make good sense for dealing with physical integration, but it isn't adequate for resolving problems of performance.

PUBLICATION DATE: January 01, 2011 PRODUCT #: SMR374-PDF-ENG

This is just an excerpt. This case is about STRATEGY & EXECUTION