“Outsourcing” is a buzzword that was originally used along with "Management By Objective" and "Core Competencies" as something that added value to a company or a business. In this case, a company figured out what they were best at, management set clear objectives and their performance was measured by those objectives. Outsourcing was a way for companies to become less vertically integrated and more efficient, moving manufacturing or other processes to companies who could do it better, cheaper and smarter. When those “others” were companies down the street or across state, that was OK. Everyone thought that the pie was big enough to share and if you could help build a national economy while doing so, so much the better.

But times have changed and those “other companies” are often no longer down the road; rather, they are several flights and many time zones away. When that has happened, it seems the discussion migrates from one primarily about objects and core competencies and becomes one of national survival. The last presidential election cycle in the United States was particularly notable for the rhetorical battles waged along these fronts, particularly identifying China as a prime source of outsourcing and, oftentimes, nearly an enemy of the health of the U.S. economy.

In this week’s podcast, I would like to address, head on, some of the issues we are seeing around outsourcing and highlight some ways we see companies are using outsourcing to China to grow their entire operations.

There are three stages to sourcing that Western companies often go through: Step 1 is Opportunistic; Step 2 is Direct; and Step 3 is Strategic.

I hope you can see that simply using the word “outsourcing” does not begin to describe the range of options open to companies in China these days. When you think of your outsourcing, try to consider your broader options in light of a bigger strategy.