Scientific Evidence That Insourcing Yields Innovation

During the recent Council of Supply Chain Management Professional’s Conference (CSCMP), I had the pleasure to attend a breakout session conducted by Scott Graves, a PhD candidate at the University of Iowa. Graves presented his research on the pros and cons of Onsite Outsourcing – what we at nGROUP call Insourcing.

Naturally this was of interest since it is what we do here at nGROUP.  The spin was a little different in that it focused on transportation, whereas nGROUP focuses on labor inside the warehouse or plant. Despite differences in tasks, the relationship is the same; a third party operates within the four walls of a client’s facility alongside their team.

The subjects for the study were IPC, a Subway franchisee owned organization that handles their logistics, and CH Robinson, a 3PL that has a team in IPC’s facility working alongside their team to manage IPC’s transportation.

Grave’s findings were insightful and consistent with our experience working with clients.

Based on his research Insourcing yields increases in the following areas:

  1. Loyalty between client and vendor
  2. Visibility both ways (client/vendor)
  3. Responsiveness in reaching objectives and overcoming challenges
  4. Innovation in finding solutions (Thinking outside of the box)

 

According to Graves, there are four key considerations for insourcing success:

  1. Task and Outcome Dependence – Dependence forces interaction and engagement between both teams
  2. Role Clarity and Autonomy – It is essential that roles of the third party onsite team members are clear and they are able to carry them out independently.
  3. Commitment – Client teams need to have a sense of accountability for the program’s success.
  4. Physical presence – Third parties should have a designated area that is their own to work in but provides easy access to the internal team.

Most prevalent negatives when it comes to insourcing:

  • From a client perspective, there are barriers to exiting the relationship.
  • From a vendor perspective, they often find themselves giving away services that are not part of the compensation agreement.

The finding that resonated with me the most was the idea that Insourcing yields innovation; an elusive and highly valuable byproduct that is desired by every company. What companies are innovative to you? I bet it’s a who’s who of industry that comes to mind (Apple, Tesla, Google, Amazon…).

The concept that insourcing and innovation go hand in hand makes a lot of sense. Third parties like nGROUP can bring a greater depth of expertise in a particular area. In addition they have more focused resources that can speed up the rate of iteration.

In our world that means combining our operations management expertise with our client’s inherent knowledge of their business to develop new strategies. Then our implementation team can focus on the execution and ongoing management, while our clients focus on improving another critical area of their company.

 

Ryan Cates is Vice President with nGROUP performance partners. As an insourcing partner, nGROUP works with companies in a vested partnership relationship. For over 25 years, the nGROUP Performance System (nGPS) has been adopted by executives and managers in labor intensive industries to meet and exceed corporate objectives. nGPS consistently outperforms other methods, increasing productivity, quality, and morale, and reducing labor costs by a minimum of 10-25%.