Saturday, December 07, 2002

On Outsourcing

I return to the summary of the radical nature of Lean from from George Koenigsaecker of Simpler Consulting . Here's his sixth point on why Lean is different from our "natural" way to think.

You outsource to reduce costs vs. you in-source to take advantage of lower lean costs.

Lets cut to the chase. This decision is all about labor rates. Do I make something here, where I pay X dollars per hour or do I send it to another state or another country where they pay 0.1X dollars per hour? An alternate discussion that hits us in the construction turns this argument around. Rather than export the work, do we import the labor?

Lean thinking says this is the wrong question. Rather than asking "what is the labor rate?" the question becomes "what is the productivity?". Lean tools are all about eliminating non-value adding steps. By so doing, more can get done in the same time. This drives productivity.

I'm writing this on a Saturday morning. This same day, United Airlines' board is meeting and will likely announce a move to chapter 11 bankruptcy before the end of the day. Why? Productivity. Southwest Airlines just keeps making money and expanding. Why? Productivity. The folks who work at Southwest have more energy and can get a plane into a gate, unloaded, cleaned, reloaded and taxing again in 15 minutes. That same turn takes well over a half hour at United and most other large carriers. Southwest has paid attention to elimination of steps that don't add value.

There is currently an excellent discussion of outsourcing vs leaning internal systems on the Northwest Lean Manufacturing Network. If you haven't joined this free Internet discussion group, I encourage you to do so. Nearly 3,000 lean practitioners from around the world participate and you can learn much.

By digging and applying lean tools, we can keep jobs and eliminate cost, right where we are. We don't have to stare at the supposedly greener grass in some other place. But it is hard work. Done daily. Done diligently. I urge you, I urge myself, to stay the course.

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