Outsourcing Is Trendy, But Is It Right for Process Expertise?

Published: July 01, 2002, By by Timothy J. Walker TJWalker & Assoc. Inc.

Outsourcing and supplier management have been hot topics over the last decade. Using external resources can provide budget flexibility for economic ups and downs as well as the advantages of specialized, competitive suppliers.

In the rush to outsource, however, we sometimes forget what should be the true goal of these programs: to organize your enterprise based on a strategic plan of internal strengths that creates a sustainable competitive advantage. The emphasis should not start with external resources but with internal resources.

As a PFFC reader, you need to know about web handling and converting technology. As your company formulates a business strategy, consider the degree converting technology is critical to your competitive position.

Many companies choose to develop and support an internal converting process expertise. This expertise may focus on equipment design, maintenance, process engineering, design for manufacturing, or advance research and process development. Dedication of internal resources must be justified based on the corporate strategy and a sound return on investment.

Can you justify dedicating all or a portion of an internal engineer or technician as the corporate or plant “web handling expert”? Put another way, can you afford not to have internal expertise in web handling and converting processes? To answer this question, we need to look at the costs and benefits.

Let's start with the costs. In the US, it may cost up to $200,000/yr for a technical employee, including salary, benefits, and overhead. To justify a full-time internal web converting expert, we need to identify a significant return on this investment. In other words, how will this internal web technology expertise create benefits?

Waste is the first place to look for potential benefits. Web handling waste includes web scratches, misalignment, wrinkling, breaks, deformation, and winding defects. Take the time to calculate the cost of waste. Material and labor losses are the easiest to calculate, but there may be a secondary effect: downtime. If your waste means a production bottleneck, downtime can mean lost sales and profits.

Productivity and new products also are potential benefits of internal expertise. Running faster and wider reduces costs. Running difficult materials — materials that are unusually thin, fragile, stretchy, or scratch-sensitive — can allow you to introduce new products to the market. Both can lead to increased waste or a competitive advantage.

Capital spending is a third area in which to seek the benefits of internal web handling expertise. What is your total investment in web processing equipment per year, including modifications of existing equipment? What is the cost of mistakes in the new equipment design phase?

Now do the math. Can you identify more than $200,000/yr in waste reduction, uptime, productivity, new products, and “right the first time” equipment design? If so, you should consider developing or adding a web technology expert.

For larger enterprises, this number may add up to millions of dollars and justify a group of internal web processing experts.

For smaller enterprises, this number may be a fraction of $200,000 and justify a part-time expert or point toward the use of external resources.

The final considerations are learning and continuity. Internal resources are better at providing the advantages of “the learning organization” (another hot topic of the last decade). Internal resources naturally pass on corporate lore to the next generation, sustaining your competitive advantage. This doesn't sound like the anticipated advice from a external consultant, but I appreciate knowing today's solutions will be passed on to tomorrow's problem solvers.

Timothy J. Walker has 20+ years of experience in web handling processes. He specializes in web handling education, process development, and production problem solving. Contact him at 404/373-3771; This email address is being protected from spambots. You need JavaScript enabled to view it.; tjwa.com