McKinsey people warn about the side-effects of outsourcing

Filed in archive Research on April 14, 2006

Sure outsourcing reduces cost heavily but at the same time it makes managing supply chain harder. One important reason is difficulty of capturing data regarding product quality, supply and manufacturing output.

McKinsey and Company analysts, based on a long research project, claim that:

- Companies that outsource parts of the supply chain have lost touch with critical data, but careful IT investments can rebuild important links.

- The importance of data categories, such as product changes and cost levels, depends on the nature of the product in the supply chain.

- Capabilities determine who manages information. Either suppliers or manufacturers may assume the responsibility, and sometimes the two may share the costs.

- Recapturing critical data will allow companies to base their choice of suppliers on a wide range of factors.