Why offshoring is your last resort in a modern era

Posted on Jul 20, 2018

If you are looking to drastically reduce your operating costs, sending jobs offshore should be your last resort. There are several steps you can take before even considering the prospect of offshoring work, the first of which is to delve deeply into your organization’s hidden opportunities to lower the cost of your onshore operations.

Further to this, let’s talk about offshoring in the modern “Trump” era. Companies are routinely being named and shamed for sending jobs offshore. In this context, it makes even more sense to first explore your company’s full potential within its onshore operations. Why risk unnecessarily tarnishing your company name, and appear on the front page with headlines such as the below?   

“Trump warns of ‘retribution’ if companies move jobs out of U.S.”
 (The Washington Post, December 4, 2016)

“Trump’s Attacks on Outsourcing Put Companies on Guard “
(WSJ, January 23, 2017)

“It’s Both a Carrot and a Stick’ Trump Has a New Plan to Punish Companies That Outsource Overseas”
(Fortune, October 10, 2017)

“Trump threatens Harley-Davidson, says leaving the US could end its iconic brand”
 (Business Insider, June 26, 2018)

Introducing a continuous improvement program will help you drastically cut costs here at home and allow you to continue supporting and sustaining the local economy, employee morale, and customer loyalty. Enlighten can help. Here’s how: 

The path to operational excellence

Step 1: Create visibility

Introduce a continuous improvement program that adopts a solid, metrics-based approach to daily management. Creating visibility, using operational metrics, is the key to finding and eliminating inefficiencies.

Step 2: Implement appropriate benchmarks

Ensuring appropriate benchmarks are in place to underpin performance metrics is crucial. Benchmarks must be calculated using ideal standards, rather than average or historical processing times. Do not include waste and non-value add activities in your measurements or your teams’ full potential could remain hidden.

Step 3: Proactive management behaviors

Your managers are most likely spending 70% of the day “doing the work” rather than managing it. To achieve operational excellence, this must change. Managers need to be provided with the tools, disciplines, and behaviors to become proactive leaders. 

Case Study

A national insurance company with 16,000 employees planned to offshore a large part of their operations. They approached an overseas provider for an initial price quote and began making necessary arrangements to move the work. However, to avoid transferring existing inefficiencies to the overseas partner, they decided to clean-up their onshore operations before offshoring. They introduced Enlighten into this part of the business, due to the 30-40% cost reduction that had been achieved in other departments.

As part of the new continuous improvement program, the company:

·         Introduced new daily metrics for all team members, with a focus on behavioral change in the frontline management and respective teams.

·         Implemented richer planning practices and oversight metrics, as well as methods and tools for use by management levels above the frontline managers.

·         Embedded a continuous lean methodology focused on waste removal.

The results? Operational efficiency improved radically and costs were reduced by 40%. Still expecting to offshore, executives re-approached the intended overseas partner with the new productivity metrics. At the new cost, however, the offshore project was no longer viable. The overseas partner could no longer match the internal costs, and all jobs remained at home.