Here’s a fascinating article from the Wall Street Journal - Honda’s Flexible Plants Provide Edge - Company Can Rejigger Vehicle Output to Match Consumer Demand Faster Than Its Rivals.

Honda plants in the U.S use what are called Gray Robots that can be set up to manufacture Honda Civics, on the welding part of the assembly process. The production line can be rejiggered to produce Honda CR-V vehicles which are are larger and of different shape than Civics. It appears that the Gray Robots have "hands" that are meant for Civics. In about five minutes time, these are changed to the hands meant for CR-Vs and the production line now assembles CR-Vs!

The impressive part of this is the cost that Ford needs to incur to change their production line from one vehicle to another ($75M and 13 months) and General Motors - $350M.

This gives Honda an enormous cost advantage and more importantly, the flexibility to switch from smaller to larger vehicle manufacturing or vice-versa depending upon Gas Prices and what people want to buy at any time. This is an enormous cost advantage to Honda and unless the other makers adopt similar ways of flexibility they may under a big disadvantage!

The same kind of principles apply to business processes also. You can design a business process for handling auto and life insurance each or you can design one that can accommodate both. Or they can be claims for one type of insurance policy or another.

Many technilogies like Business Rules Engines, Document Scanning and Storage, Workflow engines, etc have all been available for quite a while now when business processes are considered for simplification and flexibility. You can check out my article - Ten Key Technologies for Lean Process Improvement published sometime ago.

Exciting real-life examples that show the impact of flexibility in Manufacturing that can be adapted for Business Process Improvement!

Originality is nothing but judicious imitation. The most original writers borrowed one from another. The instruction we find in books is like fire. We fetch it from our neighbor’s, kindle it at home, communicate it to others, and it becomes the property of all. - Voltaire

BPO Service Providers, usually may not get an entire end-to-end business processes to be executed. They get bits and pieces of the business process, especially those steps that are manual, that they need to execute at their premises, in the same country or offshore.

In Insurance Polciy Underwritiing or Health Care Claims settlement, the manual work may be outsourced in bits and pieces but there could be significant parts of the process that may be automated with rules engines or those that require Actuarial Judgement or Healthcare knowledge.

This kind of splintering of business processes is more than the norm than exceptions. Most of the large insurance companies in the U.S outsource many parts of the Underwriting or Claims Processing processes, a lot to other third-party service providers in the U.S itself and some may go offshore.

Process Improvement then becomes a challenge of improving the whole process vs pieces of the process. It can still be done well if driven by the BPO service buyer primarily. They have visibility to the entire process, those that are done at the home company, as well as those that are outsourced to the service provider/

By clearly idenitifying , Input KPIs (Key Performance Indicators), Process KPIs and Output KPIs for each large piece of the process that is at home and for those pieces of the process that are outsourced, you can still keep an eye on how the process was before any improvement effort and after the improvement effort.

The other key advantage in outsourcing pieces of the process is that in many companies this starts the process of documenting parts or in some cases the whole process in some earnest for the first time. This invariably helps in process improvement since you have, for the first time, some accirate documentation of the whole process.

When you can’t change the direction of your wind -- adjust your sails - Anonymous

As stated regularly in my other blog entries the world of outsourcing is becoming more mature year on year. There is a vast array of process that can be outsourced, everything from lower skilled jobs in call centres to risk analytics in banking. From BPO (Business Process Outsourcing) to KPO (Knowledge Process Outsourcing) there is nothing sacred in the world of global economics. So where does that leave today’s youth? What subjects should they study that can never be outsourced? To determine this list we must first look at where outsourcing has come from and where it could possibly lead.

Outsourcing has been around for as long as people have been in business. It simply means letting someone else do something within your business if they are not actually part of it. The first time a debt collector was used to settle a debt rather than the lender, this was outsourcing. The debt collector took a cut of the total amount and became a supplier of services.

The explosion of outsourcing happened in the mid to late nineties with the Y2K projects. These repeatable, easy to describe development tasks were shipped out initially to India as the talent pool and infrastructure made it cost effective and ensured this massive project was completed on time. In this case all that was required was a scaling up of the workforce to guarantee success. From that time, a number of close relationships were forged between large western organisation and Indian service providers. It was then realised that the scope of services could be expanded. Of course there were a number of trail blazing organisations already ahead of the curve but most people will agree this was a pivotal time for outsourcing.

Things have moved from there. The array of services on offer is staggering, with more being added all the time. It is difficult for people in the industry to keep up with the offerings. Niche service providers are becoming even more niche. From companies that will look after your ranking in search engines to a recent company I came across that owned a 3D imaging system contracted to model complex structural units in airplane engines and provide measurements to manufacturing companies. The move from low skilled labour to high experience skilled professionals is continuing. So, what course should someone study if they want to have a well paid job with some guarantee it won’t be outsourced to somewhere of lower cost.

There are obviously two types of career paths, corporate and non-corporate. If students want to follow the corporate career path there will be a reduced number of career opportunities with the increase of outsourcing. A few years ago there would have been a long list of jobs that fitted into this category. Let’s look at a few of these.

Middle management still perceive of themselves as beyond the grasp of outsourcing, although, with the trend of matrix management, often managers don’t have to actually understand the work being done, orchestration of the individual work items is all that is required. In fact many conmsultancies already achieve this by placing by placing long term consultants into middle management roles. The ramp up costs for new managers can be excessive but really good consultant managers can hit the ground running and be effective in a manner of weeks.

Upper management already have the concept of non executive directors, which is essentially bringing in external expertise, but the top level executive directors, in charge of strategy in a business unit need explicit knowledge that can not be outsourced. That doesn’t help today’s students, what degree do they chose to get to those stratospheric levels.

The one thing many students have in their favour is the tenant that companies should not outsource their core. Therefore there will always be some jobs for all graduates. The main issue is that there will be considerably less of the outsourceable core skills. As the majority of companies send these jobs to external vendors.

Non-corporate skills so far have remained outside.

So what actual courses should be studied? If today’s student, if thinking about a corporate career perhaps the managerial style courses rather than courses which could be seen as core outsourcing skills would be suited best. The increasing move to global sourcing will put pressures on today’s workforce that are unknown to previous generations of students.

Talking about end-to-end processes, one has the idea it is all a smooth flowing, highly automated system that keeps rolling on! Reality in most companies is that end-to-end processes are islands of automation in various departments, with manual links between these islands of automation. This is usually because of the realities of the evolution of computing within the company. They may have installed a Financial Accounting System from one vendor, say Oracle, while they started using Manufacturing Automation software from another vendor, say Manugistics.HR automation may be from PeopleSoft. Even in companies that may have standardized on one vendor like SAP, end to end processes may span more than SAP modules in some departments. If parts of the end to end process is outsourced, like Customer Service or Support, then the CRM system used may be local but the phone system may be with the outsourcing vendor. Managing these processes, getting data about process execution and effecting process improvements become difficult.

So systems themselves become disconnected islands in an end-to-end process. Web-services enabling these different components goes a long way in connecting all of them together with a Business Process Management (or sometimes called Business Process Orchestration) software and stitching them all into one coherent, monitored end to end flow.

Web-services enabling applications may run into a lot of office politics since different departments may have their own concerns regarding data integrity and security as this article shows - Business Process Success: Advice from an Expert . So it is easier said than done, given the realities of change within organizations.

Process Improvement may be implicitly achieved and great gains made just stiching all these components of an end-to-end process together! Eliminating manual islands of work in between two automated steps of an end-to-end process achieves more than simple efficiency gains. Not having to enter the same data twice in two different systems eliminates lots of potential errors in between. Manual entry almost entails double checking or costly errors and re work. Having two systems talk to each other eliminates a lot of this waste of errors and rework realizing process improvement gains!

Nobody can go back and start a new beginning, but anyone can start today and make a new ending. - Maria Robinson

In recent article from Newsfactor it reported that Dell was planning to sell it factories to contract manufacturers round the globe. This re-focusing on core is a classic of outsourcing. Dell obviously doesn’t see manufacturing as a core function of the company and is looking to move it to a company that treats it as its core. This will free up capital and make the company more flexible in its approach getting hardware to consumers. Dell has recently lost its top spot in the market and, in these difficult times is using outsourcing as a mechanism of transformational change within the company.

The article then goes on to point out that HP (the worlds no. 1 maker of computers) has already done this.

During recession perhaps outsourcing should be considered more often as a way for companies not only to whether the storm but to thrive.

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