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Journal Article Review 2
Journal: What Happens When You Outsource Too Much?
Liberty University
BUSI 613
Professor: Dr. Quigg
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The value of outsourcing
Zirpoli, F., & Becker, M. (2011). What happens when you outsource too much? MIT Sloan
Management Journal Review, 52(2), 59-64.
Summary
Zirporli and Becker (2011). In their what happens when you outsource too much? MIT Sloan
Management Journal Review article, 52(2). Study the history of outsourcing in the automotive
industry and the implied results for Alpha Corporation. Although this study focuses on a single
company, the theory applies to other enterprises in the same industry. Or in firms in which design
and engineering parts are essential to the making of the product (p. 59-64).
Before the late 1980's Alpha had control of most of its operations. It's manufacturing engineers
successfully elaborated designs and understood the components of its cars. Soon enough,
outsourcing started to become the norm. Alpha built meaningful relationships with thousands of
suppliers. By the 1990's, Alpha was overly outsourcing, until the company found itself in a
dangerous position (Zirpoli and Becker, 2011, p. 60).
Statement of the author’s purpose
In the journal article: what happens when you outsource too much? Zirpoli and Becker
(2011), wanted to find out the extent to which outsourcing in a complex industry overlaps with
maintaining control of the crucial issues of the business. The focus of Zirpoli and Becker's study
was to discover what makes an automotive manufacturer lose control of its enterprise by the
level in which architectural knowledge and understanding of the mechanics of each component
overlap. Specifically, Zirpoli and Becker (2011) investigated outsourcing levels to comprehend
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the extent to which outsourcing diminishes production costs without compromising system
integration control (p. 62).
Background of the Issue
The principal goal of "Alpha" is to manufacture cars that are safe. Often safety is not a stand
alone component. Vehicle security in a shock situation depends on the anatomy of the safety
system and how these other elements integrate to the design of the individual parts. Alpha lost
control of the architectural design when it delegated additional responsibilities of component
development and eventually architectural design to suppliers compromising on the integration
and understanding of the system as a whole and the visual architectural design preferences of
customers (Zirpoli and Becker, 2011, p. 62).
"How the suspension felt or where the ventilation control knobs were located —were now in
the hands of suppliers that didn’t know the customers or what customers expected as well as
Alpha did" (Zirpoli and Becker, 2011 p. 61). The decision to outsource led to a compromise on
behalf of "Alpha," which resulted in the company also having to deal with local professionals
performing clerical engineering jobs (Zirpoli and Becker, 2011).
When it came to discussion of the next year car launched, during the "pre-development
phase," engineers were lost, by failing to put their skills into practice consistently, their
knowledge was fading, and they had a minimum understanding of how the individual
components worked to perfection. The lack of knowledge created a void in the engineer's
creative capacity to design or modify recalls (Zirpoli and Becker, 2011).
SCM Application Relevant to Article
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Engineers incapacity to understand to perfection all components of safety and how related
parts worked and their inability to develop new car models due to this lack of knowledge
presented a serious problem for "Alpha." According to Brandes, Brege, and Brehmer (2013)
being able to design new models every year is the sole reason why car manufacturers can stay in
business. In the automotive industry, having a unique design and performance vehicle every year
is what is known as a competitive advantage (p. 2).
In essence when the product is not easy to imitate and meets the safety and performance
standard that customers would expect (Brandes, Brege, and Brehmer, 2013, p. 2). Even though
"Alpha" had thousands of suppliers, the shutdown in "Alpha" engineers knowledge and creative
abilities ended up affecting the relationship with vendors. Suppliers themselves failed to
understand the culture of Alpha's customers and as a result what they were aiming for in a car
model and overall performance (Zirpoli and Becker, 2011).
According to Young (2014), a thorough comprehension of how every part of the business
works is essential, since without that knowledge inputs will be excessively delayed in becoming
outputs. Also, "the firm will be punished every minute it operates" (p. 61). A work process
mismatch can bring a company into bankruptcy. A process functions as expected when inputs
pass through the supply chain and become outputs through value creation for the organization
(Young, 61).
According to Zirpoli and Becker, (2011), their choice to outsource after the 1990's was aimed
at the goal that "by becoming less integrated, Alpha management hoped to increase flexibility."
This decision changed the entire focus of the business, what at first appeared to be a seamlessly
integrated relationship with suppliers, allowed managers to utilize the extra time they had to
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benchmark. According to Young, (2014), benchmarking takes place when a firm compares a
crucial component of the business, in this case, the technology to that of a similar company (p.
69).
This resulted, in a disintegration of the control of the business and as a result supplier
relationships suffered, on one side "Alpha" engineers lacked knowledge that was almost like
going back to the university to acquire along with a full-time internship. On the other, there were
the suppliers who had the knowledge but lacked the integrated marketing communication skills
to comprehend the customers. As a result, instead of outsourcing becoming a path to cutting
costs, develop competitive advantage, have integrated control of the business, remain flexible
and benchmark successfully, Alpha attained the opposite (Brandes, Brege, and Brehmer, 2013, p.
2).
Managerial Implications
“Alpha” managers should have a meeting in which they discuss how they can utilize
technology to educate aspiring engineers and turn the organization around in the long-run.
Managers should reconsider whether any random college education is truly what capacitate
engineers that work at the company and have to basically relearn a lot of basic stuff that they
took years ago in school while on manufacturing training.
If managers choose to implement “Alpha University,” they would be in control of how many
years of education an engineer would need to work in a specialized area of the manufacturing
process. Managers should design the education curriculum tailored to the specific job that the
person wants to have. Furthermore, this would allow managers to cut all the classes that are not
pertinent to having integration in the engineer's chosen field.
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In the short-run, “Alpha” managers desperately need to bring back the company to the
standards it had before the late 1980's or make a new contract with suppliers that handle safety
systems so that Alpha's engineers could rotate and work for a year overseas and bring back the
expertise to Alpha to slowly restructure the company.
References
Brandes, O., Brege, S., & Brehmer, P. (2013). The strategic importance of supplier relationships
in the automotive industry. International Journal of Engineering Business Management,
Vol. 5 (17), 1-11. Retrieved from http://ezproxy.liberty.edu:2048/login?
url=http://search.proquest.com/docview/1524220098?accountid=12085
Young, G. (2014). Supply chain management (Custom.). New York, NY: McGraw-
Zirpoli, F., & Becker, M. (2011). What happens when you outsource too much? MIT Sloan
Management Review, 52(2), 59-64. Retrieved from http://ezproxy.liberty.edu:2048/login?
url=http://search.proquest.com/docview/845235674?accountid=12085
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