I’ve recently read three articles on this topic (outsourcing) and have been thinking about it for some time myself. The articles, if you’d like to take a look were mentioned on my roundup on Valentine’s Day and included WoJo’s Don’t Hire Help, Reasons for Not Hiring Help, Kelly’s Time Management: Outsource to Save Money and Time, and Erica’s Outsourcing Life: Unconventional Advice for When You’re Financially Secure.
It’s interesting to consider what this word means. Outsourcing is the process of subcontracting to a third-party. In its earliest use, outsourcing is a way of shifting some part of your manufacturing process elsewhere. It is often confused, but is not synonymous, with sending jobs overseas. Someone can have the skill to design a new gadget, but neither the funds, nor the inclination to rent the space and buy the equipment needed to build that gadget himself. This is where a contract manufacturer (CM) comes in and provides the service of buying the components and building the end product. The CM may very well be local, within the US, or overseas. As machinery improves and much of the labor is mechanical/robotic, the cost represented by human wages as a percent of the total price continues to drop.
Even manufacturers of the electronic components will often choose to outsource and run as a fab-less (fab as in silicon wafer Fabrication plant) manufacturer. You may have heard of Moore’s law, the observation that electronics’ transistor density would double about every two years. Unfortunately, the cost of building the facility to manufacture these microprocessors has also grown, not quite as exponentially, but to the point that at present it’s fair to say that few, if any, individual companies aside from Intel can afford to build one. This is where foundries such as TSMC comes in. TSMC will accept another company’s design and manufacture a processor to that company’s exact specification. Of course there is a tooling cost to set up, which isn’t cheap, but a far cry from the cost of running one’s own wafer fab.
At a level that may hit a bit more closer to home, the car that you buy isn’t built 100% by the manufacturer. Sure, Ford is an American company and has US-based factories, but as you look at the pieces of a car one by one, you find there are a huge number of suppliers to Ford. From the tire makers to the audio system, the little motors that run the windows, etc, it’s quite remarkable how many vendors supply the products to build the cars.
Let’s bring the discussion back to our daily lives. Do you grow your own food? Weave your fabric? Generate the power it takes to keep your house warm and lit? Of course not, the thought of these questions probably strikes you as pretty absurd. There are aspects of your day to day life that are already outsourced which you likely don’t give a second thought. I know that there are frugal people who cut their own hair (Flowbee, anyone?) but it’s safe to say that most people visit a barber or go to a beauty parlor and have a licensed professional do it. If that’s you, you’ve outsourced a chore. You go to restaurants? That’s outsourcing your cooking, if only for that night. Next time, I’d continue this discussion by looking at a few things, what I personally outsource and why, what I do myself that I could hire others to do, and what I wish I could hire others to do. Along with that, a look at how people seem to view this process, good or bad.
Joe