THE NEED OF THE HOUR : INSOURCING

After a long hiatus, as I sit down to write a blog continuing from my earlier blogs, wherein I had the opportunity to express my thoughts on the so-called global meltdown, its causes and the lesson learnt, I thought it would be appropriate to put down my views on a concept that has of-late caught my attention and one approach which is perhaps the need of the hour, to get national economies out of the trough that they presently are in – what we refer to as ‘In-sourcing’.

Not very long back did efficiency and specialisation gain a lot of prominence and importance within organisations. With several management writers like Fredrick Taylor advocating increased efficiency, divisionalization of labour and focus on specialisation, the nature and scheme of operations within entities were revolutionised. Very shortly came the era of out-sourcing which involved retention of only core activities and buying in ancillary goods and services. This was seen to add better value to the organisation than having to perform every single operation related to production of the product in house. The motto was obviously ‘Do what you do best; buy what you are not so good at’. This indeed did lead to increased efficiency, lean and mean setups and increased profits. However over-time, outsourcing became a fad and organisations began to buy in most of the product components and services and did very little in-house. Although in the short-run this led to increased returns, what were lost in the process were the abilities and skills of doing things internally. From a national perspective, for developed economies it led to transference of production/ provision of services to other nations for want of cheaper and better means of achieving the end product or service. For developing economies, it provided a new means of livelihood and new sources of revenue but what was neglected and lost were the production levels and productivity capacity of primary agro-based industries, which were earlier the mainstay of these developing economies. Without any doubt the world is already facing a food-shortage crisis and the prices of basic necessities have been shooting up and this is nothing but a result of the neglect of basic agro based industries.

In the wake of the economic meltdown, as the national economies are reeling under the severe  pressures from increased un-employment, fall in demand and credit crunch, it may be noted that the economies most severally affected are those with little productive capacity, who have moved to a lean and mean approach to manufacturing and in the process lost self-sufficiency. Certainly, this does not mean that the other economies have not been affected; however the impact of recession has perhaps been less brutal on these other economies who have strived to maintain a substantial amount of production in-house.

Certainly, we are not advocating doing everything ourselves. Interdependence is indeed healthy and organisations cannot strive to do everything themselves. However  excessive dependence is very healthy and there is certainly a need to retain some aspects of production/service provision in house and thereby hold onto key skills and competencies which are the key to long-term success.

All is not lost! Lost skills and competencies can be re-learnt and excessive levels of outsourcing can be reversed with a bit of effort and this I believe will certainly pay dividends in the long run to organisation, to national economies and the global economy on the whole as well.

Comments

[saqlain bangash]

most of the experts recomend cost control as to rescue oneself from the sever impact of economic meltdown.for the very first time i read abt insourcing as the tool to overcome the crisis.thanks for such a thought provocative article.