Bringin’ it all back home

From the July-August 2016 edition of Supply Chain Management Review.

July-August 2016

What’s the difference between us and our competitors? Our people!” I can’t think of an organization that doesn’t publicly state that its people are its most important asset. Yet, anyone who has been in the…

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Outsourcing and globalization: For the better part of this century, these strategic initiatives have gone hand-in-glove at many organizations. Whether in pursuit of lower costs, simplifying operations or just trying to keep pace with the global expansion of their customers, companies have sought to outsource nonessential operations with an emphasis on more global supply chains. Many of these supply chains were established at a feverish pace as the global outsourcing trend was met with the open arms of developing countries eager to participate. Today, however, some of these supply chains have been operational for years. The low-hanging fruit has been picked and the dust has long settled from the intrepid efforts of the global outsourcing “gold rush.” Additionally the pace of economic growth of emerging economies has slowed, which may present new risks and financial considerations.

All of that is leading some companies to reassess their operations and supply chains with more global experience and a greater sense of scrutiny. While many of the supply chains established during the globalization gold rush still provide a sustainable strategic advantage, several other outsourcing decisions may no longer represent the best value option. Accordingly, organizations need to constantly reassess their strategic options and ask where it makes sense to bring some activities back in-house. This does not necessarily mean re-shoring: While some activities may be brought back to a company's home turf, insourcing may also involve using in-house personnel to execute tasks in an existing foreign market that are currently outsourced. In this regard, insourcing is the new challenge in today's supply chains.

Insourcing efforts are often justified on several grounds; these include reducing costs, improving the value delivered to customers and building organizational capabilities. However, insourcing activities are not risk free. Quite to the contrary, they involve critical challenges in transitioning work and carry a considerable risk of failure.

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