Are we jumping up and down saying: ONSHORE? Not until YOU look at the impact on the whole supply chain. Think about coordinating B2B and B2C. Think about an end-to-end supply chain. Think about good in-house systems before you go out and try to lead your supply chain. Think about your forecasting accuracy.
What you DO HAVE is a broader set of options for sourcing. The latest term is defining “bundles of activities”. It is all about value-creating not just labor costs. Now, you have these options:
- nearshoring (locations in neighboring countries)
- farmshoring (lower-cost locations in the company’s home country)
But not too much activity with onshoring IT / business processes. Outsourced activities offer reduced costs; hedging production risk; good access to talent; avoiding fixed costs; quick response in adding / deleting activities; global talent pool; ability to establish a global network; hedging against risks like currency fluctuations; disasters and regulatory changes. So why rock the boat and onshore?
It is all about adjusting your thinking. Can't just say that “noncore” business activities can be offshored. So, what is core or noncore is open to interpretation. The finance function might consider sales a core activity because it generates revenues and view operations as noncore. Those in marketing and sales might consider call centers core because they are visible to customers and view R&D as noncore.
Some say IT project management is core and should be kept in-house, while software development is noncore and can be outsourced. Downside to separating the two activities is lack of good in-house project managers in the future. You all know the career path to an IT project-leadership role often includes deep software experience. My response: buy the project management experience when you need it.
Some of the considerations are interdependencies among activities, proximity requirements, language requirements. So defining bundles for consistent sourcing relies on same ownership model, and location. All kinds of considerations: an opinion from a trusted authority: GE CEO Jeffrey R. Immelt states bundling R&D and production into one unit at Appliance Park in Louisville, Kentucky reduced waste and cost and increase productivity to achieve a 68 percent reduction in time to produce.
By getting away from core versus noncore logic and instead begin bundling activities, won't you be in a better position to optimize your sourcing strategy? So now you have a network of locations and sourcing approaches, which hedges against geopolitical, currency, and other risks, plus access to a wealth of talent.
Conclusion is revising your sourcing strategy will maximize value for your enterprise.
Last modified on Monday, 29 September 2014