What would you prefer for cost cutting, Offshoring or Process Improvement? (A PI Q&A)
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).