Outsourcing Functions Does Not Equal "Lean?
More misuse of the word “lean” (hat tip to Michael for forwarding the press release) titled, “Economy Drives Manufacturers To Go Lean; Outsource More Non-Core Functions.“
Blerg… probably not “lean” as in “lean manufacturing” or “lean thinking.” This probably means “lean” in terms of “less.” The subtitle reads:
ATS and Nielsen survey shows majority of manufacturing executives would outsource maintenance to help factories run better
Is this about running better or just slashing costs?
In the survey of 100 U.S. senior manufacturing executives, with titles of CEO, CIO, Vice President and Plant Manager, two-thirds said they would outsource maintenance as a hedge against a down turn in the economy.
So what does this have to do with true Lean principles. How does outsourcing prevent waste? Does working with an outsourced firm actually increase the complexity of getting things maintained and fixed?
“ATS has helped our factory run better”, said Glenn Kormanik, Vice President and General Manager of Service Heat Treating of Milwaukee, WI. “Our plans for growth would have been stopped in their tracks had we not begun to implement a world class maintenance program with ATS. Doing so has helped us to compete for what little business there is today but also ensure we're able to meet increased demand once the recession is past.”
So they had to outsource it to learn how to do maintenance properly? That's not “Lean,” that just proves that the company didn't want to learn how to do it properly themselves.
Enough of this “fake lean” stuff. Maybe it's “Lean As Mistakenly Explained”?
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I agree and I applaud your efforts against “fake lean”. I’m trying to do the same on my own blog. I think our job is made all the more difficult by lean practitioners who trumpet lean practices as “cost cutting” measures. I think our emphasis on waste reduction, appropriate as it might be, gets hijacked and turned into another form of the “cost cutting” mantra.
Lean and agile manufacturing methods are oriented to improving the top line, i.e., sales. It happens that they also reduce the costs of getting that top line. But the focus on lean practice as a growth strategy is too often missing.
Is there a contradiction of sorts in this post?
Toyota depends upon outsourcing for a significant portion of their parts, but I doubt that lean sycophants would take them to task for not wanting to learn how to make those parts themselves.
Manufacturers understand that the expertise brought in from dedicated line item suppliers adds value to the end product. Perhaps dedicated PM raises the performance in heat treating shop.
I’m a little confused on why reaching out to subject matter experts to advise (or even manage) portions of one’s operation is so frowned upon by Lean practitioners. I’ve seem this sentiment expressed on more than one Lean blog. Please explain.
Outsourcing can add value to one’s operation and does not necessarily translate to slashing jobs. Companies outsource certain aspects of their operation to my firm and often times we simply take over the existing workforce without cutting one job.
JM, when outsourced, the individuals might still have “a job” but it might be at lower pay and they might lose retirement benefits that had accrued, right? Maybe they lose the sense of pride from formally being part of the organization.
As for frowning upon looking to others… advice is one thing. Too often, people want to just copy an answer as a shortcut to thinking/working through it themself.
That’s just amazing: I was just reflexing on the topic of Outsourcing vs. Lean today.. And here I find this post in my RSS reader!
I mean, we know companies can benefit from outsourcing: there’s no need to be everything for everybody and better to focus on your competitive advantages. But so many times we see companies abusing the whole idea. In my practice I’ve seen a couple of of organizations whose costs… increased as managing outsourcing turned out to be much more complex than they ever though.
Yes, sometimes pay is lowered and benefits are lowered. But I can tell you in many circumstances workers’ lives have greatly improved after outsourcing. They come to us and say “Thank you, thank you. Life was chaotic before you came along and management never listened to us. I actually enjoy coming to work now.”
Of course there are exceptions to outsourcing;
most Western executives don’t take into account the additional costs of offshore outsourcing
(extra transportation, potential quality issues, loss of control, etc.)
– and most onshore outsourcing is easier than learning how to do it properly themselves.
While there are exceptions,
an accurate survey would show the majority of executives would rather outsource than help factories run better.
The issue isn’t “Is outsourcing good or bad?” Heck, every organization outsources something. (You know anyone who makes their own paperclips or copying machines?) The issue is “How does outsourcing help or hurt the business?” And Mark’s point is that too many managers don’t have a clue as to the answer to this question when they outsource what are (or should be) core competencies. They don’t have a clue as to the answer when outsourcing leads to greater complexity for which more overhead has to be added to manage it. They don’t have a clue when outsourcing leads to reduced agility, flexibility, and ability to serve customers needs.
Toyota keeps in house what it does best (design and assembly of automobiles) and outsources the rest (manufacture of rubber molding and paper clips and provision of janitorial services). That’s strategic outsourcing. Too many companies do stupid outsourcing. Outsourcing core maintenance competencies (and I’m not talking about specific maintenance projects that might require skills or capacity not found in-house) is just plain dumb.