Sorry for mentioning, my son is playing 12U right now. Most of them use bats that are 30". So your point probably still holds true. I don't think it's a matter of the bat being long enough - its a matter of approach. Is teaching them to stand way back in the box a good thing? I don't know, and would like to know if someone else has heard of this.
Wabs, makes more sense now.
My son is also 12u and the standing back in the box is to give them some extra time to see the ball, to compensate for faster pitching, nothing to do with outside pitches.
As for the outside pitch problem, agree with rroque, they need to be taught to pull the ball. Let me guess, when someone does get a hold of an outside pitch it just goes foul?
This has less to do with where they are standing at the plate and more to do with proper swing mechanics. It doesn't sound like your coach is teaching them what to do with their body/bat to manipulate where the ball will go, some 12u coaches don't.
Might want to look into a private lesson with a reputable facility to have your son understand how his arm/him/leg movements affect where the ball will go. Once he understands how that all works he should be able to hit any pitch in the strike zone and make it go where he wants it to, at least at 12u.