Onshoring, Offshoring or Outsourcing – The Reasons Matter

The last American election “exposed” outsourcing as an evil, and in part, a reason one presidential candidate defeated another.  The belief is that outsourcing – foreign or domestic – helps to optimize a business function.  I heard this argument for the hundredth times on the Washington Times Communities website in an article titled, Outsourcing vs. Offshoring.

It is the wrong thinking.

However, organizations continue to perpetuate the “optimize each function thinking” as blindly acceptable.  Sub-optimization results on a large scale.  Locking in waste for short-term profit games has become a national pastime in the US.  It is hard to find organizations that don’t lick their chops when they see the reduced costs in the form of lower wages in outsourcing.

Political and consumer backlash seems to be bringing back the jobs . . . and again for the wrong reasons.  The problems with outsourcing go beyond politics.  This is not to say that consumers should be ignored as they decide what organizations to place their business with.

The deciding factors need to connect with the waste service organizations are outsourcing.  When the design of the work prevents customers from getting their demands satisfied – we get failure demand.  When phone calls run 40, 60, 80% and higher of these types of demands -which I find in almost every organization – why would you outsource this much waste?  It is more prudent to redesign the work.  Service organizations that outsource this much waste are locking in costs, not reducing them.

So few organizations know what to measure that reduces costs and the result is managing by costs alone.  The result is always increased costs.

Before the next onshoring craze let’s address the problems first . . . the right ones.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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Hostess – A Reflection of What’s Wrong with American Business

Another American icon bites the dust.  Sure, we still have our auto manufacturers even if they are a shadow of their former selves.  We are a divided country . . . haves and have nots, 1% and 99%, management and labor, Republicans and Democrats.  The list can go on.  Winners and losers, except in the case of Hostess it is clear that everyone losses.

Who didn’t grow up eating Ding-Dongs, Cupcakes and Twinkies?  Not the most nutritional of snacks, but they were really good.  They just never continued to get better.  The product was a cash cow and I can not find one new product.

English: A Hostess CupCake, shown whole.

English: A Hostess CupCake, shown whole. (Photo credit: Wikipedia)

This is a management problem.

A declining market in what would be like trying to sell buggy whips in an age of cars.  The cash cow, suddenly becomes a boat anchor.  The ship sinks under the weight of management and labor taking advantage of past successes through pensions, increased salaries and other balance sheet and income statement busting actions.  Who would get most of what is left of the wreckage?  Not a question designed for a going concern.

These difficulties are exacerbated by six different leaders in the past 10 years.  The last CEO being a “turnaround expert.”  This, however, was a liquidation or more so a demolition.

This is a management problem.

As Americans, we have grown used to having managers going through a revolving door.  Leadership needs to be stable, so they can learn.  The misfits in management instead know how to manage a balance sheet and income statement but no little about growing a business or in this case how to build a Ding-Dong and not be one.  For American management this is what it has come too.

Management and labor are need of working together to end the madness.  The change needed is that management must first respect the worker and together work with them to improve the system.  Not just to reduce costs, but to improve culture and work on innovation.

Lesson learned?  We can only hope.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Read his articles at Quality Digest and his column for CustomermanagementIQ.com.  Learn more about the The 95 Method for service organizations.  Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.

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