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Outsource magazine: thought-leadership and outsourcing strategy | August 19, 2017

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Align to inside-outsource

Align to inside-outsource
Damian Scallon
  • On August 3, 2015

This article is a continuation of ‘Investigate to inside-outsource’; to read that article, click here.

“Good morning. Please finish up what your are doing and grab your seats,”  Peter the plant manager, told his team.

As the group took their seats, he walked around the room and gave everyone a handout: “Before we dive into the agenda for today’s meeting, I want to share an article I recently read.”

For the next ten minutes Peter discussed the article he had passed out, which was on the age of externalisation. He explained to the group that externalisation, as it pertained to them, was the outsourcing of costs to those better suited for performing a scope of work.  He made it clear that the team’s plant was not just following a fashion trend, doing what everyone else was doing.  The time had come for the plant to focus 100% of its energy on manufacturing world-class automotive components.

“….by empowering and engaging the innovative minds of your team,” Hope said, finishing the last part of the plant’s mission statement.

“Yes and no, Hope,” Peter responded.

“No?” chimed in Buck, the purchasing director.

“Well, hopefully yes, but that depends on us and how we treat our service providers,” Peter stated, enjoying the direction the meeting was taking.

“If we fail to make them a part of our team, we will not engage them,” Hope stated.

“Couldn’t have said it any better myself, Hope,”  Peter exclaimed.

“Those guys are not part of our team. They are our service providers,”  Buck responded.

“If we allow that to be our direction, this initiative will fail miserably,”  said Peter.

The point Peter needed out on the table had been made, and with it he took the opportunity to clearly present his vision for how the plant would embrace externalising costs associated with their non-core activities through “inside-outsourcing.”

He made the point that much of the plant’s success for the past half-decade was due to the great job Hope and her HR team had done in aligning plant personnel with the plant’s mission. Peter told a variety of stories where “inside-outsourcing” had failed miserably because the plant had not adopted service providers and made them a part of the plant’s family or team. In closing, Peter made it clear that service providers would be extensions of the plant’s team, but their 100% focus would be on providing the best support service, thus providing us with a competitive advantage.

“One final point.  We need the best service providers at the best value. If we are not able to attract the best service providers, we will be at a disadvantage.”

“Disadvantage?” Allen, the head of plant maintenance, retorted.

“If our competitors can attract better service providers than we’re able to, it gives them a competitive advantage, which by default it gives us a competitive disadvantage.”

Peter allowed the words time to percolate within the group. They briefly talked to one another, and nodded their understanding of Peter’s point. As their eyes found their way back to Peter, he said, “Dean, please walk the group through how we successfully attract the right service providers.”

With that, I walked to the white board and drew a diagram that I presented to the team as the model for selecting and aligning our service provider.

The model hinges on being able to clearly define the Purpose for why we have chosen to outsource by:

Damian Scallon Aug 2015 1 graphic

Defining the Need – We look for a competitive, reliable, innovative partner.

Define the Scope – We look for a service provider to take ownership and lead our:

  • Facility Cleaning
  • Facility Maintenance
  • Groundskeeping
  • Production Equipment Technical Cleaning
  • Production Line Supply

Define the Value – We look for a competitive service provider, who in turn makes us more competitive through innovative waste reduction in all areas within the scope.

Define Expectations – We clearly define how the success of our outsourcing initiative will be measured and communicated.

Re-Define the Need – We look for a service provider who will not become complacent with their initial success, and who will continually seek out ways to improve our competitiveness.

As the group soaked up these steps, I went on to mention that we do not want our new service providers to become the problem they were hired to solve, and that these steps, if done properly, would reduce that risk.

“I’ve read a lot of articles and posts about the outsourcing of activities within manufacturing plants,  and one theme that seems consistent is that when this is done right, there is an immediate cost savings. Do you agree?”  Thyme, the head of production, asked.

“Absolutely,”  I responded, and went on to outline a perspective often misunderstood by many who engage inside-outsourcing service providers. “Service providers take what are expenses to plants and turn them into sources of revenue and profit. That is their goal, and because that is their goal, they are driven to focussing 100% of their energy into effectively and efficiently delivering on that scope of work and meeting plant expectations. This is the mindset of great service providers.”

I continued. “Your statement, Thyme, is a great lead in to the other two legs on our framework for selecting the right service providers.”

With that, I went on to explain how we need to assess the processes used by each potential service provider to assure they align to our purpose.

“How so?” asked Hope.

“We obviously desire a service provider who will operate safely in the plant, so what is their process for operating safely? We wish our partners to act as partners and be innovative, so what are their proven processes for aligning with our goals? Do they have case studies on how their processes have resulted in innovative waste reduction? We wish our partner to be reliable, so what are the processes they use to assure reliability?” I stated.

“So, is it safe to say the People leg of the framework is how our new partners will train their people on these processes?” Hope asked.

“Absolutely, and not only do we want to know how they train, but we need to understand how they engage, motivate, and align their team with our purpose as well as their own,”  Peter stated.

“If we clearly outline and state the Purpose, select service providers with proven processes to align with that purpose and who have people strategies to align their team to their processes and our goals, the new partners will enhance our culture and not dilute it,” I said, taking my seat back at the table.

“It sounds all well and good, but how will we hold them accountable for meeting our goals?” Allen asked.

“Our service providers will have Strategic Operating Plans just like every other department has, and they will be posted alongside the rest in our cafeteria,” Peter responded.

“Will they be required to report out in the same manner as we do?” Thyme asked.

“In fact, they will be part of all of the report outs, and all of you will be part of theirs. Remember, we are hiring partners, and as such they will need to be treated as partners. If we do our jobs right in our selection, our partners will have a vested interest in the plant’s long-term success, as our success translates into their success,” Peter said.

“Do you want me to include a template for the Strategic Operating Plan with the package we are preparing for our new potential partners?” Buck asked.

“Great idea, Buck, and will you walk the team through what you and Dean have come up with on how to introduce the service provider candidates to this opportunity?”

Buck handed out a time line, and discussed how he and his team had surveyed various manufacturers to identify potential service providers for the plant. He explained that they had feedback on multiple points, and in each case had closed out by asking one final question: On a scale of 1-10, how likely are you to recommend this service provider?

“We did not include anyone who did not score either a 9 or 10,”  Buck said, giving the room a chance to review his one-page handout.

“If I am reading this right, we have three potential service providers?”  Allen asked.

“We started out with over two dozen, and through the survey process the list was whittled down to three.”

“Nice work, Buck. So what is our next step?”  Hope said.

“On the time line in front of you are the days we have arranged for yourselves and the service providers to tour the operation and meet with us. During those meetings, we will hand out the package we’ve developed that outlines all the steps of our Purpose. All of these service providers have requested access to the facility during off hours so they can assess the scope of work and figure out where they can add value.”

“How much time will they be given to pull together a proposal for us to consider?”  Thyme asked.

“We asked them that question during our initial discussions, and all generally feel they could provide us with a proposal within three weeks,” Buck stated.

“When would they be able to start?” Allen asked.

“That’s a question we’ll ask at the group meeting, and it will be a determining factor in the selection process as well,” Peter said.

“Peter, we are getting close on time. I would like to outline our internal communication plan with the group,” Hope stated.

“Yes. Let’s make sure we all understand the importance of this critical step.”

Hope explained to the team that one of the key findings Buck had uncovered while surveying manufacturers was the importance of communicating to each and every team member in the plant why the decision to outsource was being made. Hope conveyed to the group that many manufacturers had skipped this step, resulting in plant personnel drawing their own conclusions.  Most felt activities were outsourced to find cheap labour. This conclusion led plant personnel to treat a service provider’s team as second-class citizens, which diminished their motivation and in turn the value of the outsourcing decision in the first place. She outlined that team meetings had been set up on all shifts to present the outsourcing initiative, and to clearly outline to everyone how important the initiative was to the continued success of the plant. She stated that Peter would address each of the teams, and everyone in today’s meeting group was expected to also be present.

Hope concluded with, “Our message is that our team is going to become 100% focussed on the manufacture of world-class auto components, and to do this we need to remove all other distractions. We will also inform the team of the sub-assembly requirements that are going to be part of the new model year, and what that will mean for us.”

“We have built up a lot of trust with our team by being transparent and visible with information.  They are proud of the awards we have received, and are happy to participate in our financial success. What we are planning to do with our outsourcing initiative allows for all of us to continue down that path, but we have to be diligent in the selection of competitive, reliable, high quality partners,” Peter said, drawing the meeting to a close.

As the team members gathered their personal items from the table, Peter walked over and asked if I could make myself available at the meetings when the potential service providers outlined their proposals.

“Definitely. Buck already mentioned he might be looking for some support in that area.”

“Perfect, and thank you.”

“Peter, this was very impressive today. You really set the stage for a successful outsourcing initiative.”

“What we are proposing to do makes total business sense, and gives us the opportunity as a team to focus on our core business. I am hopeful the economics fall into place as we review the proposals,” Peter said, extending his hand.

“I’m sure they will. The one thing all great service providers are looking for is great customers. I’ll see you in a month.”

To continue reading this article, click here.


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