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Outsource magazine: thought-leadership and outsourcing strategy | June 26, 2017

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Investigate to inside-outsource

Investigate to inside-outsource
Damian Scallon

“Good morning, Peter.  Nice to see you,” I greeted him, shaking his hand and taking a seat at the small conference table in his office.

“Good morning, and thanks for making the drive up to discuss my outsourcing issue,”  he responded, taking the seat across from me.

“Your call sounded urgent.”

“Not so much urgent as very important and strategic,” Peter stated.

For the next fifteen minutes Peter outlined the continued evolution of his product and the new needs of his plant. He was the plant manager of a very successful plastics molding and painting facility that produced sideview mirrors for several automotive manufacturers. The product used to be no more than a molded plastic housing that held a mirror. Today that same sideview mirror is required to de-ice at the push of a button, house indicators to inform other drivers of turn decisions, react to bright headlights, and be adjustable from inside the car to suit a driver’s visibility needs.

“And the list of features continues to grow each year,” Peter added with a smile.  He went on to explain that more and more vehicles require all of these features, and his plant needed to focus all of its energy and resources into innovating production and assembly of the mirrors.

“And that is why I asked you to make the trip up to Grand Rapids,”  Peter said, pausing to allow me time to process what I had just heard.

Putting my pen down, I asked “So, you are seriously looking to outsource some of your non-core activities?”

“We are actually very serious about looking to outsource all of our non-core activities. We feel this makes good business sense.”

“Interesting choice of words, ‘good business sense’,” I stated.

“By my definition, good business sense means non-core activities are done with a higher level of quality, more efficiently, more effectively, and more competitively than if we continued to do the work ourselves,”  Peter explained as I picked my pen back up. “With your vast experience with these types of outsourcing initiatives, I was hoping you could help us pull together a path forward,” Peter said, getting up to refill our coffee mugs.

“Be glad to,” I replied, taking out a pencil and getting a few sheets of blank paper from the printer sat on his side table. “Mind if I sketch as we talk?”

“Not at all.”

“What you are talking about is called inside-outsourcing.”

“Interesting term.”

“Yes, it is. It means you are outsourcing activities that will be performed in your plant by an outside service provider. The important thing to remember and not lose sight of is that the employees of this service provider will work with your employees.”

“Hmm.”

“As you know, nothing impedes efficient and effective production worse than morale issues, and you do not want to hire in a morale issue.”

“No, a large portion of the reason we are experiencing such growth is due to our culture.”

“Peter, you just hit on a key word, culture. The inside-outsourcing service provider must enhance your culture and not erode it.”

Standing up, I walked over to the wall where the plant’s mission statement was hung.

“Your mission statement says you will manufacture world-class automotive components by empowering and engaging the innovative minds of your team.”

“Yes, and, unlike many, we actually live it and believe in it.”

“If I recall, it was not always that way though?”

“No. When I first got here, there was a lack of trust on the shop floor. They were tough years.”

Sitting back down, I picked up my pencil and drew an oblong box on the paper.  I wrote in the box “Define Your Need”.  For the next ten minutes, we discussed and documented why Peter
was going to outsource as opposed to what he was going to outsource.

“From this, it is clear to me that I need an inside-outsourcing service provider who will work harmoniously with my team while focusing their energies on improving the operation of our non-core areas,”  Peter stated, also taking notes.

“As opposed to a service provider who will just do the activities as you have previously done them at a somewhat lower cost.”

“We cannot overlook cost,” Peter exclaimed.

“Cost or value?” I asked.

“Good point, value.”

Drawing another box on the piece of paper, I wrote in the words “Define Scope”. We moved the discussion to what activities Peter was considering as part of this inside-outsourcing initiative. After twenty minutes of discussion, the list had several categories:

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

“You really are moving away from your non-core activities,” I commented.

“We have to focus plant energy on improving how we manufacture, as well as avoiding waste in our production process.”

Drawing another box on the piece of paper, I wrote “Define Value”.  As Peter watched, he stated, “not define price or cost?”

“We can change it to either of those, but let me tell you why I chose to write ‘Define Value’.”

We sat and talked about the need for the inside-outsourcing service provider to understand their long-term success would be tied to reducing the facility’s total operating costs. The true value in outsourcing was not to find a cheaper source to perform activities, but to find an inside-outsourcing service provider who would drive out all forms of waste in the non-core areas.

“I’m sold. Define Value it is,” Peter said, jotting down a few more notes.

Drawing another box on the paper, I wrote “Define Expectations”.  We sat and discussed how important it was at this stage of the outsourcing initiative to establish how success would be measured. Success would be based on not only completing the work but more importantly on aligning with why the work was outsourced in the first place. We also discussed making expectations very visible and transparent to everyone in the plant.

“This will help me with buy-in from my team,” Peter said.

“Exactly.  We have found that once expectations are clearly stated and visible, team members of the inside-outsourcing provider also pay attention and take pride in their accomplishments.”

“Which method for communicating expectations have you found to be the best?”  Peter asked.

“The expectations document ends up with many names depending on the plant, but the most common name is Site Strategic Operating Plan.”

“I like that.”

“The Site Strategic Operating Plan, often just called an SSOP,  captures strategic objectives, measures, strategic drivers, annual initiatives, and results. We like it because it also leads to a monthly meeting between the inside-outsourcing service provider and the plant management team, which focuses on the reason for the outsourcing initiative.”

“Very practical approach,” Peter said.

“Yes, it works very well, and plants that adopt the discipline of monthly meetings benefit greatly.  The SSOP also makes the final step in this process much simpler.”

I sketched another oblong box, and wrote “ReDefine the Need”.

“This is the one step where many outsourcing initiatives fail,” I stated with a bit more authority than was probably needed.

“Really?  Why is that?” Peter asked, matching my stare.

“Every year your needs change. You and your management team discuss the impact of the changes and prioritise initiatives to meet those needs.”

“Yes, we do.”

“When you outsource, you need to have the same discussion with your inside-outsourcing service partner. The SSOP is a great way to capture the changing needs and allow your partner to align its team with your changing needs.”

“Very simple really,”  Peter said.

“It is very simple, but as you know many plants fail with these initiatives because they do not spend the time to initially Define the Need and then annually Re-Define the Need.”

“This has been very informative.  I will have my team work on pulling together packets and more details surrounding activities of the scope of the work.”

“And discussing the expectations and measurables for success.”

“That is a given,” Peter said, smiling.

“Perfect,”  I said, putting my coffee cup back on his credenza.

“Can we re-convene in a couple of weeks to have a broader meeting with my team and discuss the next steps?”

“Sounds like a plan. Just send me an invite, and we’ll set aside a full morning for this.”

As we headed back to the plant’s lobby, Peter asked, “What do you call what we just did?”

“Establishing the Purpose,” I answered.

“No purpose, no partner,” Peter exclaimed.

“Exactly, and no partner, no successful initiative.”

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