To Offshore … Or Not to Offshore: New Book Discusses Outsourcing

By Consulting Specifying Engineer Staff October 18, 2004

Many U.S. manufacturers and knowledge service providers are faced with the perplexing question of whether to outsource overseas. They must cut costs to remain economically viable, but they’re not sure that moving offshore is the right move.

They’ve heard the pitfalls to sending operations overseas. Send an operation overseas and you may well find that the move is not as cost-effective as you thought. Communication lapses, quality shortfalls, poor connection with customers—these problems and others plague manufacturers who’ve taken the offshoring leap. And in the end, says a leading process improvement consultant, many companies discover that it would have paid to look a little closer before they leapt.

A new book, Integrating Lean Six Sigma and High-Performance Organizations , by Tom Devane, offers an alternative to what is termed “knee-jerk offshoring.” Devane is an international business consultant who believes that outsourcing overseas is not necessarily the answer to business success.

According to Devane, the McKinsey Global Institute estimates that the volume of offshore outsourcing will increase by 30% to 40% a year for the next five years. Forrester Research estimates that 3.3 million white-collar jobs will move overseas by 2015.

“There always will be situations in which offshoring is the most economically viable solution,” said Devane. “Call centers, with their simple processes, few handoffs and short duration of transactions, are a prime example. But too many manufacturers are offshoring in a ‘knee-jerk’ fashion. What many of them are discovering the hard way is that for an operation to work smoothly overseas, the business process must be in tip-top shape so it can be executed well by locals. And the irony is this: if a company gets the process into tip-top shape prior to moving it, it may find that it doesn’t need to offshore after all.”

The answer, says Devane, is obvious: before you commit to moving a segment of your corporation overseas, pour your energy into significantly improving it. You may find that your efforts make the operation so cost-effective and so high-quality that you don’t have to send it overseas. Either way, your improvement efforts will not have been wasted.

Even if you do end up offshoring, you’ve created a process blueprint that will make the transition as quick, efficient, and profitable as possible.

Devane recommends that a firm combine the best parts of the three most powerful improvement disciplines: lean enterprise, six sigma, and high-performance organizations. As his book explains, this precisely balanced and focused combination allows

“The solution consists of successfully leading the combination of three improvement disciplines that eliminate waste, strive to reduce process variation, and reshape culture into one of execution and continuous improvement through the development of high-performance teams,” explained Devane. “Improvements of great magnitude are not uncommon when these are implemented together, or even in phased segments.”

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