I believe outsourcing can be a symptom of not innovating anymore.
Imagine having to contract out every prototype to a metal working shop — it slows down your ability to iterate because you can’t just go downstairs and try it.
But once you have a design set in stone, outsourcing is cheaper than doing it in-house. These companies specialize in producing parts with economies of scale.
But if you do it for too long, you kind of lose the ability to quickly iterate. Striking a balance is hard.
> But once you have a design set in stone, outsourcing is cheaper than doing it in-house. These companies specialize in producing parts with economies of scale.
Except you need to ship the parts to your factory and still employ QA people who must check whether you got what you paid for.. If the supplier has a bad defect ratio, you must order more parts. It's not as cut-and-dry as you think.
Every time your assembly-line halts, you're paying people for twiddling their thumbs. The more external suppliers you have, the higher the risk.
Don't the fines for halting a line cover the cost of the halt for the manufacturer?
I'm currently working at a supplier for some companies in mostly the automotive sector and the line halt fines per second seem to all be in the couple grand range so I always assumed it should be enough to cover the halt.
Though the QA part is real. There's so much theatre in tricking clients into believing their QA measurements are wrong when something happens it's kinda funny.
I think its a symptom of economies of scale being able to go too far. Cost per unit seems to keep going down basically infinitely and it is a problem.
Making less than 10,000 of anything just doesn't seem to make economic sense unless you assume there is a chance no one will want any of them.
Except when you've been working with suppliers who have already been iterating on <insert widget> for years in a competitive environment.
The amount of innovation in the automobile industry is staggering when you think of its history more holistically.