Not outsourcing to increase own skill sets?
South of Negombo, Sri Lanka. I found myself walking in the rain along a totally unknown path along a small river which I hoped, and half expected, would lead me to the beach. The rain had been a bit of a light drizzle when I first set off but slowly it gathered the look and feel of a monsoon shower. Even my umbrella started to feel inadequate to deal with the steady moisture descending from the grey clouds above. It was a pathetic piece of equipment just bought in despair the day before. A few villagers looked puzzled as to why I would go for a stroll at the time when they were seeking shelter in what was had to pass as a house. I hardly paid attention to them thought let alone to the pigs scurrying around.
I needed to clear my mind. The previous day I had had a challenging discussion with the chairman of Colombo Dockyard on whether or not to outsource the prefabrication of steel (i.e. the cutting and bending of steel plates). A few interesting emails had already exchanged so his stance was no real surprise. His argument was that the bottom line was not as important as developing the required skill sets. “The yard is 51% owned by the Japanese and”, so he continued, “they don’t like to outsource”. The latter bewildered me as Toyota had perfected outsourcing with their JIT modeling. “That”, he argued, “was a global company and not really Japanese.” Delivery reliability, with possible delays at Indian customs, was also tabled as an argument.
I must admit that I admire and appreciate his position especially with regards to acquiring skill sets. It was a concern I also had while at the ING. We outsourced their internet banking to India and a lot of staff had walked out of the door, unlikely to ever return. This, I had felt, was burning critical capital. We had done all to keep the key people on board during the actual transition phase. After all, talented people leave first, confident that they will find another employer willing to adsorb them, and the duds go last and unlikely voluntarily.
The particular shipyard is also a repair yard so they would never be in a position to outsource 100% of their prefabrication work. Repairs need to be done fast, very fast, with three shifts working around the clock. Half the time no drawings would be available so their staff would need to improvise and rely on their skills. As arguments are rarely black and I wondered therefore how much, if any, should one outsource in such a situation?
Outsourcing to specialists means that you obtain higher quality at an agreed time and at competitive rates. It is the accepted business model these days. With pre-fabrication being our core business it is only natural that not a single shipyard will be able to achieve our skill level as our growth depends on innovation, investment, etc. In other words, it is a mixture between the right hardware, software, human development, work methodologies and financial strength.
We have fully integrated and super fast CNC machines and our presses were admiringly referred to by their staff as ‘the Mercedes among presses’. Annually we spend a significant amount on R&D to add or improve specific features to our software. It is not something one can buy of the shelf nor would one have the capacity to justify such steep investments. Human development and work methodologies are indeed very valuable aspects. Our cold forming methodology achieves a much higher precision in a fraction of the time and with absolutely no stress left in the plates but it requires a huge investment.
How many staff therefore should be trained in-house to justify an army of contract labour having to struggle to produce lesser quality? The answer to that very question was roaming through my head as the rains became more incessant. My preference would be a 1:3 mixed set up. Keep some work to ensure the skill set is retained for the urgent repair jobs and outsource most to increase the operational benefits and increase the very skill set of the staff you want to retain. What is often overlooked is that working interactively with a specialist ensures that your own capability maturity also increases.
With that thought I walked into my hotel and put my soaking shoes for drying.