Outsourcing not always a money saver

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'Cost" is not the only reason.

Cost is not the only reason to out source nor can you simply measure the cost of the actual work. Let me give an example.

I have a client that builds specialty packaging machinery for the food service industry. (Think Wheaties in the box.) He has a relatively small company with about 30 people in total and they are very good at designing and building the equipment.

About a year ago he added his own welding shop to reduce the cost of sending it out side the company. He effectively cut off relations with the welding shop he had done business with for years.

Things went along as expected and he liked looking at the bottomline and not seeing any charges for welding services. In his view, he had cut cost and saved money. However a few more months go by and there was a problem and I was asked to look it over.

In a nutshell, the problem was that they were not turning out the machinery fast enough, they weren't even close to previous levels. Why? Well because he had his expert machinery people spending time welding or learning how to weld at the same quality the previous shop had given them.

They were now involved with a skill set that did nothing to promote fast turn around and production of the machinery that paid the bills. They had allowed themselves to be distracted from what they do best.

I often see the samething with IT. Companies are so focused on IT they forget what it is they do to make a living and the bottomline suffers. It just isn't obvious as to why.

Like the above example, sometimes handing something over to people that do it everyday and concentrating on what you do best is the smart solution...

Posted by: No_Ax_to_Grind   Posted on: 11/18/03 You are currently: a Guest | Members login | Terms of Use

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