The Outsourcing Culture

By Randy Burgess

On the surface, it sounds pretty simple.  You find a company or multiple companies to do the dirty work — the secondary chores that have to get done to complete the manufacture of a product or make your business run smoother.  With those tasks out of the way you can focus on your core strengths, devote more internal resources to customer care, and, hopefully, increase efficiency and profitability.  But before throwing the outsourcing switch, companies need to think about the issues that define who they are — their value to customers, their differentiation in the marketplace, their strategic objectives and even their corporate values.  The question is not as simple as “Can we save or make more money by outsourcing?”  You can.  The challenge is to minimize the time-to-benefit and maximize returns by thinking about outsourcing as a cultural issue that affects everyone in your organization.   

What do we really do?

Whether you manufacture consumer durables, electronic devices or textiles, your core competency may be an element or combination of elements within the overall product design and development cycles.  Core competencies could be Design, R&D, Engineering or any number of other skills and disciplines.  They could be different things to different people within your organization, and outsourcing what some consider a cornerstone of your business might be difficult for them to understand.  The best way to deal with morale issues that could be triggered by outsourcing is to head ‘em off at the pass…ask key stakeholders about core competency and develop a consensus opinion to get more skin in the game.  It’s a standard practice for developing Public Relations (PR) messaging, and one that can help you define the roles and responsibilities that you want an outsourced services company to provide.

Internal change management

Several Adexa customers have reported that the adoption curve for their new planning applications would have been faster if they’d proactively engaged end-users in the implementation process.  The same applies to outsourcing.   From shareholders to administrative staff, the impact of outsourcing can be forecast across the enterprise, and strategies for communication, education and re-training can be developed BEFORE the outsourcing plan is rolled-out.  At all levels, it’s important for people to understand why a change is being made, the benefits it will deliver, and exactly how it affects them.

Managing your outsourced services partner(s)

They may be doing the dirty work but, to the customer, your name is on the finished product and your reputation is on the line.  You have to know that the outsourced services provider has the capacity, inventories and commitment to meet your demand and deliver on time and on budget, every time.  Trust needs to be based on real-time visibility into planning and execution systems, not just reputation.  Ask not “What have you done for me lately,” but rather, “What are you doing for me now and what can you do for me tomorrow?”  This is where Adexa solutions come into play.

Adexa’s Collaborative Operations Planning (COP) solution enables OEM’s to collaborate with contract manufacturers and, for that matter, multiple enterprise sites, on the development of operations plans that are dynamically synchronized with financial targets and other corporate objectives.  Inventories, capacities, forecast demand and actual demand are all modeled and optimized for profitability in real-time and all stakeholders contribute to the process over the Internet.  The OEM has complete visibility into plans and order status and receives alerts that are automatically generated to troubleshoot exceptions before they become problems.  The solution also models OEM overstock components that could be utilized by the contract manufacturer, thus ensuring that those components will be used before any new supplies are purchased. 

All Adexa planning solutions access the same data model and changes to one type of plan (our COP plan, for example) are dynamically propagated to the others.   So a long-term sales and operations plan will be automatically considered when near-term supply chain and demand plans are developed.  Further, Adexa’s web-native architecture enables intra-enterprise and extended enterprise stakeholders to be involved in the planning process with Internet collaboration.  This increases the accuracy of all plans and, ultimately, efficiency, profitability and customer service.  More detailed information on COP and other Adexa solutions can be found on our website.

Cover your bases

As you develop your outsourcing strategy, try to mitigate associated risks.  For example, if manufacturing services are being outsourced to a country where the chances of political and/or economic disruption are high, you should have contingency plans in place to minimize the impact on your business if the worst case becomes a reality and you have to find an alternative services provider.  Who else can do the job?  What are the supply chain implications?  What are the costs of a changeover?  Is it worth the risk to outsource to this particular service provider in the first place?  What kinds of risks are associated with my potential new providers?  What costs are associated with those risks?     

Is it worth the effort?

If you compete on price then the answer is almost certainly yes.  Outsourcing eliminates infrastructure and lowers direct labor costs and your competitors are already doing it.  The only way to compete is to realize the same savings that they have realized and the only way to beat them on price and customer service is by better managing your extended enterprise and its supply chains. 

Randy Burgess is the editor of the Adexa Arrow.  He can be reached by email at rburgess@adexa.com .

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