Global sourcing, whilst offering benefits to customers in the county doing the outsourcing, has the long term effect of reducing the relative innovative capacity of the “outsourcer.”
As innovators seek the lowest cost for the product of their innovative output, the location of that resulting manufacturing acquires the capability to improve on the original from the proximity of daily interaction with the production, so are in a better position than the original innovator to build on the knowledge emerging from operational implementation.
What do you think the chances are that the next iteration of mobile technology will come from Chinese subcontractors to Apple? Following the example of chip manufacturing, formerly located in the US where the development was located, and now concentrated in Taiwan, I would think pretty good!
In the Australian food industry, manufacturing has been gutted, significantly driven by the twin impacts of the power of the retailers, and high Australian dollar making packaged goods imports cheaper.
We all understand sustainable innovation is the lifeblood of industry, and are increasingly understanding that sustainable innovation also requires the proximity of the manufacturing operations to the R&D and commercialisation activities that feed the process. That virtuous circle has been broken in the Australian food industry, amongst others, and I despair that it is so far gone that there will be no coming back, no matter how much the SME sector points out the obvious to the wallies who make the short term decisions with such dire long term impacts.
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