Outsourcing creates great value - when the implementation is well managed
One of kaastrup|andersen's customers outsources the production of over 900 spare parts and components, so that the company's unique competencies can be utilized in the core tasks instead.
The company estimated that many resources could be saved by not expending precious production time resources on spare parts that are only to be produced in small quantities and instead utilizing the production capacity to produce new products in larger quantities. The company has therefore chosen to outsource parts of their spare parts production to several manufacturers. Implementing an outsourcing process is a complex task; the company has reached its goals and gathered experience and knowledge, which now forms the basis for a best practice model that makes it easier for the company to establish outsourcing solutions in other areas of both production and service functions.
Read the case below and find out what you should be aware of when considering outsourcing.
The area in question is responsible for over 900 spare parts. The production of the many parts is dependent on specific tools and components, test equipment and other material. Outsourcing of the production therefore requires a complete and thorough overview, to ensure that all elements are described in the documentation for the new manufacturers who are going to take over the production of the outsourced spare parts. Thus, both parties are assured that the supplier has the necessary equipment and materials to produce products of the right quality and to the right specifications. The ultimate consequence of a lack of overview is that the company risks an internal production stoppage (due to faulty or missing spare parts), and this is costly.
Outsourcing of the production is dependent on finding the necessary product documentation within the company: If the required documentation for each of the items to be produced does not exist, there is a risk that the parts cannot be produced correctly by the supplier. And in some cases, there is no documentation to be found, so it needs to be created. Master data from both the company itself and any subcontractors who supply sub-components for a given part must also be included in the documentation. Once the outsourcing process has been implemented and the supplier produces the many spare parts, it must also be ensured that data flows to the outsourcing company again, so that the company maintains full control of the production.
Thus, there are many details to be aware of, and many pitfalls on the way to the full outsourcing of the approximately 900 spare parts.
The outsourcing project has several goals:
- A complete overview and documentation of all the components of the spare parts; including a plan for which spare parts are to be outsourced, as well as in what order it is to take place
- Ensuring that the new suppliers are able to deliver products of the right quality, quantity and on time; including ensuring that the company does not run out of a given spare part
- Establishment of clear and distinct ownership for each individual product and its documentation
- Clarification of responsibilities and guidelines for Operations & Maintenance after the completion of the project (from both the company’s and the suppliers’ side)
- A clearly defined process for how outsourcing tasks should be implemented in the future
The project thus handles an analysis task that forms the basis for a further assessment – business- and operational-wise – of how the outsourcing process can best take place. With this assessment in hand, the project is also responsible for the actual implementation of the outsourcing: Each of the many components undergoes a thorough analysis with the future supplier(s), so that all parties are confident that the supplier are to produce component as desired, and that the necessary documentation is available.
The project group continuously gathers and consolidates their experiences with the process, so that the goal of establishing a clearly defined outsourcing process is achieved - for the future benefit of the rest of the company.
Outsourcing frees up capacity for the continuous production of new products to be manufactured in large quantities; it increases the efficiency of the factory, the production capacity is utilized much better and the profitability increases. The project establishes alternative and flexible supply chains for the older parts, which are part of the company's obligations to their customers.
Overall, this means that the company is stepping up the production - and deliveries - of new products at the same time as the company's service business, which is the buyer of the spare parts, gets a clearly defined and focused supply chain that supplies the required products.
The project has also created a process for how outsourcing generally should take place in the company. Thus, the foundation for potential future outsourcing of tasks elsewhere in the company is laid, so that the company can sharpen the focus, reduce costs, and exploit new business opportunities even better.
kaastrup|andersen is responsible for the project management of the project.
Is your company also considering outsourcing tasks? Do you have an overview of how it is done and what it requires? Take a look at a few other projects we have handled in collaboration with our customers: Outsourcing solved poor efficiency and lack of production space and Do you need scalability? We can help you find out if outsourcing can be a good strategic move for your business.
Give Lars Glowienka a call on +45 70 27 77 19 or send an email to email@example.com, and together we can look at how outsourcing can help your company.