JULY 2002 BROADSHEET - Pros and Cons of Out Sourcing
Our June meeting attracted a strong audience eager to gain from some very experienced practitioners of the art of outsourcing. The meeting organiser, Alasdair Poore of Mills and Reeve, gave an able introduction as a lawyer skilled in the tricky problems of sorting responsibilities, and indeed it became clear as the meeting progressed that the slightest vagueness in the initial boundary conditions could lead to disaster. On the other hand all the speakers emphasised that TRUST was essential, as was being able to get along well with one's partners.
First on the floor was Mike Urwin from Cambridge Display Technology. He had recently transferred from Philips where he was instrumental in achieving a major policy change to outsourcing of manufacturing and the concentration on IP and key processing knowledge. Every decision required careful analysis and it was vital to retain in house manufacturing expertise. The results were lower asset base, flexibility and better financial ratios. The challenges were keeping a good relationship, keeping the know-how and keeping control. CDT initially franchised all manufacture but has now set up a pilot plant in Godmanchester in order to fully develop knowhow of the most critical manufacturing processes.
Jeremy Rose of Creative Solutions has a core team of three, operating at board level making outsourcing arrangements for many very large corporate companies. The skill was in setting very tight specifications and budgets so that any slippage is taken up by the sub-contractors. It is vital to choose these associates carefully, the right people for the job, in whom one could have absolute trust. This has to be built up over time and the thirst for more work in the future is an essential element.
Finally Dr Philip Gaffney OBE, who gave us a talk on the Virtual Company three years ago to the day, updated us on the development of his company, now called Internet-Extra. It was a stimulating talk then, even more so now with his emphasis, not only to require automatic daily reporting from all partners, but the immediate reading of them to detect the first signs of 'scope creep'. This phenomenon was death to any outsourcing contract. Even the slightest variation in design or timing, so often glibly agreed by someone else in the organization, can cause enormous delays and often exorbitant lawyers fees! Strict adherence is the byword.
Questions brought more factors about the importance of trust, which could only come through working together. In practice all participants were enthusiastic, no doubt due to the high rewards of the system. One significant comment affecting universities - never trust a gifted amateur.
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