Global outsourcing: Have U.S. managers thrown the baby out with the bath water?

Abstract

for high labor costs. intelligent management of raw material costs, rather than new technology, was primarily responsible for shifting the comparative advantage in steel production in Japan’s favor (Mohan and Berkowitz 1988). In the automotive industry, numerous articles have noted the significantly greater degree of outsourcing, versus in-house manufacture, in Japanese automotive companies compared with the “Big Three” U.S. companies. Typically, figures of about 60 to 70 percent outsourcing for Toyota versus 30 to 40 percent for General Motors are reported. The successful use of higher percentages of subcontracting by .Toyota, Nissan, and other Japanese automotive companies has been cited increasingly in recent years as a model for U.S. managers, who have increased their own outsourcing.