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.
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.
Posted by: saqlain bangash | 26 February 2010 at 15:13