What Happens When you Outsource too Much?

Article critique
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Article critique
Zirpoli, F., & Becker, M. C. (2011). What happens when you outsource too much? MIT Sloan Management Review 52(2)
Statement of author’s purpose
Zirpoll and Becker (2011) carried out a research to systematically observe the effects of a lean product development approach on an organization’s competencies and knowledge areas, and the degree that execution of design outsourcing affected the sustainability of a company’s outsourcing strategy. The authors selected the context of the automotive industry which is highly complex in terms of companies and technologies involved in the processes of innovation. One specific manufacturer, Alpha, was chosen. Zirpoli and Becker (2011) examined 2 research centres of this company in addition to its first-tier suppliers. The authors observed alterations over a period of ten years, during which they gathered archival data as well as company documents and carried out interviews with staff members, its 8 first-tier suppliers, and its research centres.
Application of supply chain management theory to article
The theory that is applicable to the selected article is the Resource-Based View (RBV) theory. According to this theory, the capabilities and resources of an organization are its most significant assets. A company should be concerned with getting access to the core competencies of another company in order to achieve competitive advantage (Young, 2014). In essence, Resource Based View considers the company as a bundle of resources, which, if utilized in distinct capabilities, could create competitive advantage for the company. Those distinct capabilities are considered as core business and they should therefore be internalized, while non-core businesses are outsourced (Young, 2014). Resource-Based View theory helps in identifying various critical factors which inform the buy-make decision; that is, the decision of whether the firm should outsource or not.
RBV is relevant in this article since Alpha, the carmaker discussed in the article, adopted a new strategy in the 1990s in which the management of the company started to shift more and more amounts of engineering and design work to suppliers. Even though every company shifts it activities to outside suppliers, Zirpoli and Becker (2011) reported that Alpha automotive company pushed outsourcing even further such that by mid 1990s, Alpha started outsourcing the design of complete systems like safety systems and dashboards to suppliers who were able to provide whole system. Basing on the Resource-Based View, Alpha focused their resources on core competencies where they have a clear-cut advantage over their competition and provided unique value to their clientele. Additionally, Alpha’s senior management outsourced activities for which it does not have special skills or crucial strategic need.
Background of issue
The major issue in the article is that Alpha outsourced too much. To Alpha’s top management, outsourcing entire systems including even the design of those systems appeared to be the right d...