What would you prefer for cost cutting, Offshoring or Process Improvement? (A PI Q&A)
My Response
Given that 85% of all Supply Chain Initiatives fail to achieve the expected results, and more than 90% of all Outsourcing Contracts do not meet client requirements, your question is one of “diverse approaches to a converging outcome of ineffectiveness.”
While there are many programs such as Six Sigma, SCOR and a growing array of other “best practice” initiatives that are being presented as providing the roadmap to sustainable success through increased efficiency (of which removing costs from the supply chain is a key element), others have opted to delegate the responsibility by entering the realm of outsourcing.
In terms of outsourcing, here are a few interesting pieces of information that I am sure you will find compelling (for the corresponding case reference link contact the author):
Well-documented history of outsourcing failures
A Gartner study released at its 2003 Gartner Symposium/Itxpo 2003 stated half of then year’s outsourcing projects would fail to deliver on bottom-line promises. (Information Week, 3/26/2003)
“Few outsourcing mega deals have been successful in the past 10 years – at least 50% fail in the first year and 80% don’t produce any savings.” (Bobby Gill, senior associate, technology, media and telecom group, at law firm Osborne-Clarke) (The Banker, 3/1/2003)
. . . for every raging success, there is a bone-crushing failure. (Insurance Networking News: Executive Strategies for Technology Management, 3/1/2003)
A 1996 American Management Association study of 619 firms found that less than 25% of those that outsourced finance and accounting functions fully achieved their goals of cost reduction, time reduction, or quality improvement. (Government Accounting Office Report, 10/20/1997)
A Gartner Group survey of 180 clients in 1995 found that only 37% of outsourced IT arrangements were viewed as successful in achieving objectives (Acquisition Review Quarterly, 3/22/1999) Publish Date: August 2004
(Contact the author to obtain the link to a May 2007 article titled 10 Notable Outsourcing Failures)
As to the programs that many organizations rely upon to “lean” their operations, I have included a few links in the Web Resources section below. (NOTE: contact the author for URL links to additional resources)
Collectively you will discover that either outsourcing a problem or looking for a magic bullet from an external source will not overcome the absence of effective stakeholder engagement (see Parts 4 and 5 of the Dangerous Supply Chain Myths Series).
What would you prefer for cost cutting Offshoring or Process Improvement A PI QA - To learn more about this author, visit Jon Hansen's Website.
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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