"Rather than producing goods in a single process in a single location, firms are increasingly breaking the production process into discrete steps and performing each step in whatever location allows them to minimize costs." - remarks from Fed chairman Ben Bernanke at yesterday's FRB of Kansas City's 30th Annual Economic SymposiumExactly the same in services. 20 years ago, my optometrist affiliated with one of the "glasses in an hour" firms. Back then, a good business decision. Today, her office has been stripped of the admin support to provide patient care -- patient calls are now routed to a call center, and callers are limited to one transaction: making appointments. (And sadly, this development forebodes the end of my relationship with a doctor who has provided me with excellent care.)
When firms seek to lower costs by farming out components of a process, they may fail to accurately understand their new total cost -- until the disarticulated process has unintended consequences.
Back in b-school in the early 90s, my Corporate Strategy professor Paul Tiffany remarked: cutting costs is not a strategy. That said, I smell the work of a "strategy" consultant behind the decision to outsource the face of patient care to a call center.
