Outsourcing
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ADVANCED STRATEGIC OUTSOURCING

10 Chapters 33 lessons Advanced

About this course

Quick, take a guess what is the most outsourced service on the earth today? Think of all the potential services in your company that can be outsourced; cast your mind far and wide.

Try not to miss anything. Once you have thought of potentially every service that can be outsourced, make the guess again. Out of everything that possibly be outsourced.

Guess which is the most outsourced service on earth today

If you guessed call centers, you are wrong. In fact, if you guessed any of the following services – Logistics, IT, sales training, fleet management or payrolls – all popular services to be outsourced, you are wrong too.

I will tell you the most outsourced service on earth today somewhere within this chapter.

What else will you find interesting in this chapter?

You will learn to recognize how ubiquitous outsourcing   is the modern day organization and life, and how to keep your eyes open to recognize situations that are amenable to outsourcing.

 When you see the full list of all the activities within a company that can be outsourced, it may surprise you a bit.

You will also learn why you must NOT outsource in some circumstances because of strategic or tactical reasons. In our work we frequently meet people who are dogmatic about outsourcing – on both sides of the fence.

We have met directors serving on boards of large organizations who are deal against outsourcing. On the other hand frequently we meet people at all levels in organizations who would rather outsource than do the tasks internally.

When asked as to which way do we lean, our answer is almost always – it depends. Indeed,  there are situations where you must NOT outsource.

However, there are situations where you must outsource. We have come across situations where companies are reluctant to outsource in situations where that would have been the best course of actions.

What keeps the companies from following the best course of action?

We will examine some of those criteria in detail in this chapter. However, there is another set of criteria or measures that are equally important.

 Outsourcing being now so ubiquitous, is there a way to distinguish between a good outsourcing arrangement and a bad one.

We will see a few key measures focused on the outcomes that your company (or the outsourcing company) is seeking from the arrangement.

What are the key criteria that help you decide when to outsource and when not to outsource?

Outsourcing Continuum: From Simplicity To Sophistication

Ask 100 people  W hat image comes to mind when they think of outsourcing ,  and 99 people will describe a sweatshop in China or Bangladesh, or a call center in India or Philippines.

No doubt these are somewhat stereotypical images of outsourcing conveyed by the media, but let me describe the other end of the continuum.

To understand its full potential, as well as the barrage of debate surrounding  outsourcing in the modern business networks ,  let us look at Boeing as a brief case study.

Its 787 Dreamliner has been one of the most innovative and costliest projects on Earth today.

From the beginning it was apparent that to keep up with Airbus and to create the next generation of airplanes, Boeing would need extensive cooperation of the best in the world.

The most noteworthy feature of the 787 Dreamliner productions is perhaps the fact that out of the entire airplane, only one part – the tailfin – is manufactured by Boeing itself.

The rest of the plane – the fuselage, the engines, the avionics, the landing gear, even the wings are all manufactured by the outsourced service providers all over the world.

 Secondly, since sections of the fuselage are baked hard in autoclave ovens, purpose built large autoclave ovens are installed in various locations of Boeing’s outsourced service providers.

 Some of the biggest autoclaves in the world were built for the 787 project. The one in Wichita, Kansas is 30 feet in diameter and 70 feet long.

For the  first time ever, the wings of the Boeing Airplane are made overseas by Fuji in Japan.  A purpose built plant with cutting edge technology and capability to use carbon fibre helps Fuji meet Boeing’s rigorous standards.

Fuji not only builds the wings and parts of the fuselage that hold the wings but also works with Boeing to fine-tune the design specifications to meet the stringent strength and stability requirements.

Sub-assemblies are brought to the final assembly plant in Everett, Washington in a special plane called the Dreamlifter.

It has a swing tail that opens out and a large cargo loader unloads the pieces coming from Italy, Japan, South Carolina and Kansas.

Moreover, the wings come from Japan, the horizontal stabilizers come from Italy, the engines from Rolls Royce in England, landing gear from Messie-Dowty in France, and the largest section that comes in a single piece is the 85 feet long mid-section of the fuselage, built by Global Aeronautica in Charleston, South Carolina.

The story of production of Boeing’s 787 Dreamliner is a poetry in motion and a true global supply chain in action.

At the time it was envisaged, this business network attracted a lot of positive and negative publicity.

However, it is clear by now that the new product development time was shrunk, the capital cost of development as well as risk was reduced significantly as a result of extensive outsourcing.

TEST YOUR RETENTION 

On "WHEN TO OUTSOURCE AND WHEN NOT TO OUTSOURCE?"

* This Quiz has 5 questions ( Estimated Time -  2 Minutes)   

Course Structure

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Strategic Frameworks for Outsourcing Decisions 4 lessons

$26 Billion Question – “When To Outsource And When Not To Outsource?”

This Chapter is based on OUTSOURCE, OUTSMART, OUTPROFIT – KNOW WHEN TO DO IT, AND HOW TO DO IT WELL by the author. Sydney, Australia based author Vivek Sood is the world’s foremost authority on Global Supply Chains.

Is There Something That Can’t Be Outsourced?

Fundamentally, Each Of The Department Carries Out Its Tasks At Four Different Levels – The highest level being strategic, the next lower level being tactical, the next lower level being operational and the finally the lowest level is the executional level. At the lowest level the execution of the task is carried out, while at the highest level the plans are long term all-encompassing plans.

Conclusion - Strategic Frameworks

Outsourcing has been around for a long time and is widespread. While biases abound, there are relatively very few situations in which a company must not outsource, or must outsource.
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Myths About Outsourcing and How to Know the Truth 3 lessons

Myths About Outsourcing And How To Know The Truth

You want to find out how to use the leverage provided by outsourcing without the risks inherent in all leverage. We will be covering that material in the second part of this book. However, I want to point out in this chapter that everybody who in interested in the topic of outsourcing also have pre-conceived opinions on the topic. No doubt, you will have some too.

For This Chapter We Have Selected 7 Of The Most Popular Myths To Explore And Explode.

This myth pervades the thinking in some executive circles, based on the assumption that the decision to outsource can not only be easily implemented, but also easily reversed! However, in most cases this is far from true. Outsourcing is a strategy not a tactic. You are making a multi-year commitment, not only because of the contract, but to make the financial reasoning work; you also have to dismantle the PP&E, systems and people you have built up over time.

Summary - Myths About Outsourcing

Outsourcing is an emotionally charged topic. Not only does everyone have a horse in the race, they cheer it quite vocally.
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Traditional Outsourcing 4 lessons

Traditional Outsourcing

When you read Chapter 3 of the book ‘Insourced Outsourcing: The Results-Focused Outsourcing Modularization'

Outso​urcing Is A Fact Of Life In Business Today

We will however, briefly focus on three relevant parties - BP, Transocean and Halliburton for the sake of discussion relevant to this Chapter - on modularized outsourcing.

Why Is This Pattern Of Failure Repeated Over And Over Again?

To answer the key question above, let’s first examine a typical project cost structure. It is estimated that the software costs are no more than 15-20% of the overall cost of systems renewal.

Key Mistakes In Large Scale Information Technology Deployment

A wise colleague (David Ball) once taught me, ‘people don’t care how much you know unless they know how much you care’.
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Cures for Outsourcing 3 lessons

Cures For Outsourcing Failures

When you read Chapter 4 of the book ‘Insourced Outsourcing: The Results-Focused Outsourcing Modularization ’

Different Outsourcing Models

Obviously, depending on the contractual terms and conditions specific to the arrangement between any two or more parties, there can be an infinite number of variations of the outsourcing arrangements.

Conclusion - Cures for Outsourcing

Outsourcing is a common practise in the current context but many contracts are still failing. New models and perspectives enable companies to find new way of outsourcing and try to fix the problems.
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Modularization and Results 2 lessons

Modularization And Results-Focus Is The Solution

In this essay, we are going to try to explain the cornerstones of modularization and why it suits well with a results-focused outsourcing process.

Conclusion - Modularization and Results

Results-focused Outsourcing and Modularization is very attractive for companies in the current global context because it brings flexibility, control and cost reduction.
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Preparation is critical 2 lessons

Preparation Is Critical

The most important question anyone can ask about outsourcing is this – Why do so many outsourcing arrangements fail?

Conclusion - Preparation is critical

In all our project work in outsourcing, nothing comes close to value added as in preparation. Frequently we come across situations where companies think they have done adequate preparation, when a few simple questions reveal that it was far from adequate.
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Rules Of Engagement 3 lessons

Rules Of Engagement

If preparation was the critical first step in the process, then the next one, designing a fit-for-purpose market engagement process is the most artful step in the entire process. As we will note later in this chapter.

Summary - Rules Of Engagement

In fact, the possibilities are endless once you realize all the permutations and combinations of various parts of the market engagement process.

Conclusion - Rules Of Engagement

Outsourcing can be a great success, as well as it can turn into a disaster. That is the reason why the following points need to be carefully analysed in order to meet the objectives of the company through strategic sourcing.
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Selection 4 lessons

Introduction - Selection

Selection is the next step in our outsourcing process. Indeed, we have already seen that preparation was crucial, and engagement was the next step after preparation.

Collate And Analyse Vendors’ Propositions

In this Request For Proposal, the company has to specify its requirements according to what it is really important to it and how they want to do it.

Mode Of Selection

We can define almost all the selection methods that exist, although we could find more methods that combine some aspects of each one of the following methods.

Conclusion - Selection

Although it can take time to establish a criteria evaluation, it is necessary for the customer not to be surprised in the future. There are different selection methods and one can be better than others according to the project's characteristics.
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Integration 3 lessons

Introduction - Integration

The biggest mistake that companies make during the integration process is that they let the vendor lead the process.

Integration

Outsourcing processes, sharing information is necessary and very beneficial for all parties. Sharing information among all the supply chain partners seems to be the best strategy for managing integrated supply chains.

Conclusion - Integration

To conclude, integration is what links all the different subsystems or components of the process. It brings them all together in one unique system and enables them to work together.
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Value Creation 5 lessons

Introduction- Value Creation

Value creation is the final key of the outsourcing process. It involves a lot of expertise, knowledge on the process, as well as the needed capabilities and tools.

Value Creation

This huge network built through outsourcing makes possible combination of internal and external resources and capabilities, which enables synergies.

Parties Involved In Value Creation

The outsourcing initiative will have effects on all the parties within the company and outside the company (but still within the network).

How To Evaluate Value-Creation?

The easiest way of evaluation value-creation is to compare the results with predetermined referential, called benchmark in business situations.

Conclusion - Value Creation

Value-creation is the primary goal of any business. Most companies must agree on the fact that Results-focused outsourcing is the best way to create value.
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