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Outsourcing has been in practice for years in one form or another. A common form of outsourcing that has existed in manufacturing since Henry Ford’s day has been whether a company should make or purchase components of products or services they are building and selling.
Skills and Tools Required
When evaluating how, why, and when you should consider using outsourcing as a strategic tool, first inventory the skills you need to effectively develop, manage, implement, and sustain this type of program.
Development and Implementation of Outsourcing Programs
Laying the groundwork for any outsourcing program begins long before any supplier is ever contacted. It’s necessary to develop a plan that includes clearly defined objectives. Success in outsourcing depends on having a clear vision and a defined corporate strategy. Knowledge of the current requirements necessary to deliver the outsourced commodity, the service levels to be met, and the costs associated with meeting those levels are also essential for success. The structure of the outsourcing agreement depends on the goals you set in the early stages of the process. Once you have identified the commodity or process to be outsourced, take the following actions:
Measurement and Enforcement
What are the factors involved in successfully managing and sustaining your outsourcing program? The contract and statement of work specify the required service levels, performance expectations, penalties for nonperformance, and termination clauses.
Michael Patton is president and CEO of Corporate Strategic Services, Inc., a management consulting group based in Columbus, Ohio. Mr. Patton has 22 years of experience in purchasing, materials, and project management, including vice president of purchasing and office services at Huntington National Bank for five years. He has held management positions with major firms including Shell Oil Company, Baxter Healthcare, CRSS, Hoechst Celanese, and Cardinal Industries. He has been an NAPM member for 20 years and is a frequent instructor at various association seminars and workshops. A graduate of The Ohio State University, Mr. Patton has done post-graduate work at Texas A&M University.
- Benchmarking Evaluation Services™ The Benchmarking Network, Inc., 1997, "Doing Outsourcing Right"
- Electronic Buyers' News, December 9, 1996, "Taking Outsourcing to the Next Level A Step-by-Step Guide to Becoming a Virtual Corporation"
- Information Week, January 20, 1997, "Hidden Partners, Hidden Dangers"
- Investor's Business Daily, December 28, 1995, "Think of Outsourcing?"
- InvoServer® Coopers & Lybrand, July 1997, "Planning Beyond the Honeymoon"
- Johnson, Mike, Outsourcing… In Brief, Butterworth-Heinemann, 1997
- KnowledgeBase An Information Technology Law Bulletin, Winter 1995, "Focus on Making Outsourcing Work for Customers"
- Lacity, Mary Cecilia and Hirscheim, Rudy, Beyond the Information Systems Outsourcing Bandwagon: The Insourcing Response, John Wiley and Sons, 1995
- Outsourcing Guide, August 1997, NAPM
- Outsourcing: Implications for Supply Management, 1997, NAPM/Center for Advanced Purchasing Studies
- The Outsourcing Institute, New York, 800/421-6767; http://www.outsourcing.com
- Purchasing Today®, September 1996
- Rothery, Brian and Robertson, Ian, The Truth About Outsourcing, Gower Publishing, 1995
- United States Banker, January 1991, "Are They or Aren't They Bank Employees?"
- Wee, Don M., Downsizing and Outsourcing Opportunities: Right-Sizing Requires Right-Sourcing, Loyola University Chicago, Information Technologies Division, 1992
- White, Robert and James, Barry, Outsourcing Manual, Ashgate Publishing Company, 1997
FOR FURTHER READING
- Minoli, Daniel, Analyzing Outsourcing, Reengineering Information and Communication Systems, McGraw-Hill, 1995
- NAPM InfoEdge, February 1996, "The Outsourcing Decision: Why, What, When and How"
- NAPM InfoEdge, November 1997, "Writing a Complete and Effective Statement of Work"
- NAPM Insights, November 1995, "Put it in the SOW"
- Purchasing Today®, February 1997, "The Outsourcing Decision: What to Consider"
- Purchasing Today®, October 1997, "Back to the Table"
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