I noticed the other day an article advising that in 2012 the outsourcing trend started to reverse itself.
Wikipedia cites various reasons:
“Rising third-world wages, recognition that many off-shoring costs were large and hidden, rapid consumer product innovation and shrinking design/manufacture to market times, reduced manufacturing costs flowing from integrating skilled workers into the product design teams (dramatically cutting assembly times and complexity), increasing overseas fuel and transportation costs, falling energy costs in the US, increasing US labor productivity, and union flexibility”
For any organization looking at insourcing, the key considerations are:
- The physical infrastructure you had prior to outsourcing may no longer be in place. This is not a bad thing, you have an opportunity to acquire facilities that support more automation and streamline work that has to be performed manually.
- The skill sets both at the worker level and at supervisory levels that were present may no longer be present. It is an error to assume that these need to be re-created exactly as they were prior to outsourcing because we have today process management methodologies that no longer require the same levels of skills for the performance of work.
Bottom line, there are opportunities with insourcing to see lower costs than the costs you had prior to outsourcing. And, there can be an expectation of seeing lower costs than the costs you had during outsourcing, providing you plan insourcing carefully.
Guidelines for Insourcing
Here are a few guidelines regarding insourcing of manufacturing:
1. Build a knowledgebase of all of the moving parts. As you move forward, you will discover missing parts. You will need to add these and consider their impact on your insourcing plans. Keep your knowledgebase current over the timeline of your insourcing initiative.
2. Evolve a way of identifying alternative scenarios at the knowledgebase and highlighting the more promising of these. Avoid making subjective assessments regarding scenarios.
3. Do an ROI on the scenario(s) you feel are the right ones.
4. Embrace the concepts of Adaptive Case Management (ACM) and Business Process Management (BPM). Make ACM/BPM the cornerstone of your entire insourcing initiative.
5. Map out all of the processes that will be needed – do a first pass at a high level of summary, then map out individual processes to a level where they can be implemented to provide orchestration of the work. Model your processes and improve these before implementing them.
6. Make sure you have a run-time environment where your mapped, improved and tested processes are able to provide orchestration (i.e. guidelines) for the performance of work. In any organization where there is a mix of unstructured work and structured work, the environment you choose must have a core focus on “Cases”. Cases accommodate any range of objects, extending from traditional relational database “fields” to storage facilities accommodating pdfs, doc files, spreadsheets, images, even video recordings.
7. Put in place governance at key process points to prevent activity that will cause significant variation on outcomes.
8. Do not skimp on training. Whereas the principles of Adaptive Case Management and Business Process Management are not new or difficult to master, you need to get staff and management on board and keep them on board.
9. Hire an experienced hands-on consultant to come in for a couple of days to assist you with building a roadmap for your insourcing initiative. Steer clear of consultants who borrow your watch to tell you what time it is.