Would You Box With 1 Arm Behind Your Back?


I recently an article on how LG is going to outsource all their computer manufacturing. This is an interesting trend in the industry because all computer companies (Dell, HP, Apple) are moving from design and manufacturing to just designing the computers and just outsourcing the rest.

What does that mean? Well imagine your in a boxing match and instead of 2 arms you’re fighting with only 1. Before computer companies like LG could design the the computer, and leverage their supply chain and manufacturing to deliver to the customer exactly what they wanted and when they wanted. Now because they have introduced a middle man their lead time grows tremendously and are not able to respond to customer demands very quickly. Now they have to have the best designers to be on top and they are only fighting with 1 of their arms.

You might say so what? Well imagine there was an issue with a motherboard and the computers needed rework. In the old scenario you have a shorter lead time and less inventory so you aren’t affected as much and are able to recover quickly. Now imagine you have to store 10X more finished goods inventory because you have a 3rd party vendor manufacturing your product. This scenario actually happened at a company that I worked with and it was not a pretty sight.

Unfortunately they didn’t learn from their mistake and continued with the outsourcing process. Do you think this is a good idea for LG to to make this move?

UPDATE: I just found this article on Dell. What are your thoughts?