Back to Basics: The tools and resources you need for outsourcing

A reader recently indicated that I should lose the buzzwords and platitudes in my blog posts and focus more on real-world advice. And while some industry jargon and terminology is always required, I agree, too much is not helpful. So with that in mind, here are some real-world tips:To outsource you need a team that:

• Buys into outsourcing
• Knows the product/products/processes
• Has credibility with his or her peers.
• Has the ability to lead a team and drive actions to get the project closed in a timely manner

To outsource the production of a product you need the following resources:

• An executive sponsor. This person should be high enough level to validate your work and to promote the concept across your organization
• A project manager. You will want to run this like a project.
• A commodity manager for the project. This person should own the supply base and be able to generate your agreements and drive them to close actions.
• An engineer. This should be someone that is considered the expert of the product or products you have picked.
• A finance person. This will help bring credibility to your numbers (either for or against). Note, this could be done by the project manager or commodity manager, but it is nice to have a third party to verify results. There is nothing better than a good bean-counter nodding his/her head and agreeing with the numbers.
• A quality person. This is critical, as you need the quality to be supporting this effort. If you don’t bring them in from the start, they will shoot holes in the project from all angles.

Depending on your organizational structure you may need a couple more roles, but these are the basics as I see it.To outsource you need to know and document the following:

• A product. It should be a simple one to enable a win from the start.
• Your current BOM. It needs to be clean. You cannot have multiple part numbers reporting into one (ie -multiple cable sizes reporting into one part number)
• A clean set of drawings/ documents. Typically there are many parts that we get that don’t match their drawings or the BOM’s, so get what you can. (I try to have my future supplier do a “art to print verification” in which they compare the known good part to the drawing to ensure it is correct and built to print.
• Your build process. Typically your build process is well documented. If not it will need to be. Keep in mind the more detail the better.
• Your test process. Again you may have this done, but you need it to be specific and include troubleshooting.
• Current leadtimes. Supply chain, transit, build, test and crating all must be included.
• Current costs. Again, supply chain, transit, build, test and crating.
• Current quality measures. You need to set a baseline and determine what your goals are going foreword with the outsourcing. This will also help determine where your supply chain’s problem areas are.
• Current stocking. Are you building to order or to finished goods, and how do you want it going forward?

Once you have all of this your ready to begin, if not get these things done and you can move to quoting.

It is hard to find good suppliers and you will need your team to travel to do it. Your team should identify 10-20 potential suppliers of everything you will need-not 10-20 per commodity but overall. Go and visit each site, come up with a scoring matrix and hit two suppliers a day for about four hours each. Rank them and pick the top three or four and just quote them. If you can’t get the numbers you would like, start this process over until you have what you feel like is a good start. Be careful of being over-critical, these plants are not U.S. plants and OSHA means something different there (just kidding-they don’t have OSHA!).