Tag Archives: subcontracting

#Insource is the new #Outsource

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workersA recent report from Deloitte suggests that bringing jobs back in house (Insourcing) is a small but growing trend against the much larger tendency to Outsource which has dominated western industry for the last thirty years.

Companies are increasingly realizing that Outsourcing is no longer the best value option. Anyone who has been involved in Outsourcing knows it is never as simple as it’s made out, often requiring intensive effort from Managerial & Engineering staff & extensive, frequent travel. Not to mention increased wage costs in China & India, increased shipping costs and numerous supply chain delays.

The biggest issue Western companies face with Insourcing is the lack of trained, skilled staff to deliver the service. Having made thousands of workers redundant in the pursuit of cheaper Outsource options this is somewhat ironic.

This need may be met by making good use of the highly skilled Freelance professionals who operate in the market to satisfy just such demand.
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Insource or Outsource ? #pmot #in

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Far East manufacture should not be the default option

Far East manufacture should not be the default option

Over the last 14 years Manufacturing in the U.K has shrunk from a respectable 28% of GDP to today’s all time low of 10%.

So maybe it is time to rethink our outsourcing strategy ?

Over the years we have become very complacent in the U.K about manufacturing, and in many respects have given up the ghost. We have blithely subcontracted all of our manufacturing operations with no long term view of the consequesnces. We have given away millions of jobs for a short term monetary gain and are now reaping the rewards of an economy built on sand.

Outsourcing to the Far East should NOT be the default option. We need to look at the alternatives and take the following into consideration:-

1) Compare Apples with Apples – just because the Direct labour Cost may be cheaper in the Far East what about the support costs. It is inevitable that a subcontracted operation will need more indirect suppport, sometimes more than you could possibly imagine, and this cost needs to be accounted for somewhere.

2) Is the Quality of the product really going to be the same ?- how will you ensure this ?

3) Cost of shipping – with rising fuel costs have you taken this into consideration ? you need to understand the cost per unit shipped.

4) Environmental Policy – How does the transport and distribution of products across the world fit in with your Environmental Policy – if you want customers to “buy in” to your Environmental Policy it needs to be credible and any offshore manufacture and transport should be accounted for in your overall Carbon Footprint.

5) Time of shipping – can you afford to delay initial deliveries while they are on the Sea for 5 weeks or do you want to pay extra for air freight to ensure fast delivery ?

6) Have you considered the cost of Import Duties ?

Consider the success of some of our best industries in the U.K – auto manufacture, Aerospace, telecommunications, mobile phones etc etc

Outsourcing should remain a key component of our manufacturing strategy but should note be the default option. We need to challenge the assumption that manufacturing will be subcontracted by asking the right questions.

chris@projectsguru.co.uk

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PGBANNERSTATIC

Outsourcing at any cost ?…..

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In July 2009 Sun Danyong comitted suicide by throwing himself from his 12th flloor apartment. Sun’s apartment had been ransacked and he claimed in a text, immediately before his death, that he had been badly beaten.

Sun worked for the massive Taiwanese CEM Foxconn (Turnover |$10 billion) which manufactures Apples iconic iphone. He was rumoured to have been suspected in the theft of an iphone prototype. The incident sparked an Audit by Apple but to date no visible action has been taken.

iphoneThis incident highlights the ethical dilemmas posed in Subcontracting. How do we deal with massive corporations which often dwarf our own ?  How do we balance the need to reduce manufacturing cost with the need to deal with undemocratic regimes with questionable human rights records ?

Do we do business at any price ?

Like most dilemmas the answer lies with the consumer. Western consumers are increasingly conscious of the ethical and environmental impact of their actions, where does that food come from, what is involved in it’s manufacture ? Who benefits and who gets hurt ?

This conciousness will extend to all areas of consumption including electronic products and it is those companies which pursue an active, ethical and evironmental policy which will ultimately benefit.

chris@projectsguru.co.uk

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Now we’re Insourcing……………………

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reengineeringFriday’s News that Automotive component supplier Bosch is closing its plant in South Wales and moving manufacturing to Hungary was grim news for employees.

However, this action is actually bucking the latest trend.

A recent survey by manufacturing group EEF revealed that one in seven companies had moved manufacturing back to the U.K in the last 2 years.

Nearly seven in ten agreed that the U.K was now a competitive place for manufacturing.

The falling price of sterling, increased cost of freight, repeated quality concerns and time to market issues have combined to make the U.K increasingly attractive.

The biggest issue is in obtaining personnel with the knowledge and skills required to establish successful manufacturing lines.

This is being addressed by hiring interims with the experience to deliver results by ‘hitting the ground running’

chris@projectsguru.co.uk

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Outsourcing is not an easy answer…

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SPA032

There is little doubt that outsourcing, when done correctly, can save money and inprove service but there are a number of things you need to be aware of when considering outsourcing:-

1) Product Quality – there are many in-house practices which are not documented which contribute to product quality. If  Product manufacture is outsourced these checks and balances will no longer be present and product quality will be adversely affected. It simply isn’t possible to document everything.

2) Hidden Cost – whereas unit cost will be cheaper (otherwise why do it) the overhead cost of managing and monitoring the Outsource supplier may be greater than anticipated, this needs to be closely monitored and managed.

3) Loss of I.P.R – It doesn’t matter what legal documents you sign some of your Intellectual property will be lost to the Outsource supplier and even end up in the hands of your competitors. You need to be aware of this.

4) Project Timescales –  Early Projects will suffer unplanned delays, this is an inevitable part of the learning curve.

5) Cultural Differences – these should not be underestimated and, if not clearly understood, will lead to confusion and misunderstanding.

Managing Ousource Projects requires experience and skill. You should seriously consider engaging an Outsourcing expert particularly in the early stages of the Project.

chris@amberhill.biz