Two Keys to Fighting Outsourcing: Benchmarks and Vision
Only solid, quantifiable performance and benchmarking data can counter attacks from outsourcing providers. So don’t get comfortable; analyze your shop’s performance against the competition now.April 2012 By Howie Fenton
Despite the painfully sluggish recovery of the economy, the competitive threats to in-plants are not diminishing. The reason: print volumes are not returning to pre-recession volumes, so fewer in-plants are achieving their goals (i.e,. financial break-even), leaving the door open to an outsourcing or facilities management company.
This usually leads to an analysis of the situation that plays out in one of two ways. If you're lucky, you may get an objective analysis by an independent source. If you're unlucky, the analysis may be done by the outsourcing or facilities management (FM) company. Some in-plant managers say that this is like the fox guarding the henhouse. Either way, the more you know about how your in-plant's performance compares to industry leaders, the stronger your case that your in-plant has value—and the more likely it will survive the scrutiny of the evaluation.
We discussed this in presentations at IPMA and ACUP, but it is worth repeating. Even if you're satisfied with your performance and don't see any outsourcing or FM threats on your radar screen, you still should consider analyzing your in-plant's performance against other in-plants and leading companies. You may not use it today or tomorrow, but getting into the habit of tracking performance and benchmarking against leading companies is a best practice that is always good to follow, because only solid, quantifiable performance and benchmarking data can counter outside attacks.
Don't wait until you're under the gun. Even if you're doing well, there are probably areas that can be improved and new services you should be researching. Be proactive, and be prepared. It's a position of strength to know your strengths and weaknesses, especially when you can demonstrate that you are working to improve your performance and address your customers' changing needs.
It is not unusual for someone providing an FM or strategic outsourcing solution to offer to do a free make vs. buy analysis. This compares your costs to manufacture to their costs if they took over or bought the same products. Their goals are simple: If they can demonstrate a savings of 20-30 percent, they will offer to split that savings. That means they would take half as their fee and your company would save the balance.
The easiest way to combat these threats is to ensure that your prices are competitive. This is why you should think carefully before implementing a price hike. And be aware that those posing threats may talk about how much tougher it is for the in-plant to remain competitive because the salaries and benefit plans of in-plant staffs may be much higher than those of employees in commercial shops. Since this is often accurate, the best way to counter this argument is to talk about productivity.
NAPL Senior Consultant Howie Fenton works with in-plants to conduct audits that benchmark operational and financial performance metrics to those of industry leaders, recommends improvement strategies, and provides coaching on how to become an in-plant leader. For more information, contact him at (201) 523-6328 or email@example.com