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The power of outsourcing

By Gary Forger, Editorial Director -- Modern Materials Handling, 9/1/2004

To say the least, outsourcing and its evil twin offshoring have a high profile these days.

Alan Greenspan talks about it.

It's part of the presidential campaign.

There was a move in Colorado to have a ballot question that would prevent jobs located in Colorado from moving offshore.

Forty two of the 50 states use offshore call centers to handle inquiries about their food stamp programs.

Even Folio magazine, the magazine about magazines, did a cover story on offshoring everything from editors to production people. That's more than enough said about that nasty proposition.

But the most intriguing example of outsourcing is at McDonald's—the one in Cape Girardeau, Mo., to be specific. At the drive-thru window, no less.

Each customer's order is handled by a call center in Colorado Springs, 900 miles away, according to a recent story in The New York Times. The order is sent back by high-speed data lines to Cape Girardeau along with an electronic photo of the customer.

By pairing the order and the photo, accuracy increased, complaints dropped, and service became faster. In fact, one of the many McDonald's franchises using the call center says order fulfillment time has dropped to 1 minute and 5 seconds. That's considerably less than the national average at McDonald's of 2 minutes and 36 seconds, said The Times. Oh yes, 30 more orders can be handled an hour at that drive-thru window.

Now we're at the nub of the issue about outsourcing. It's not about politics or economic policy or jobs. It is all about costs and efficiencies on a case-by-case basis. After all, who (other than someone who really understands it all) would have ever proposed outsourcing the order taking process at a McDonald's?

The same can be said of the people at Transcontinental Printing on the east side of Montreal. It now prints the French language daily newspaper La Presse at considerably lower cost than before.

Central to the success of this contract printer (there are plenty of ways to say outsource these days) is an automated storage and retrieval system that slashed paper stock from more than 21 days to just 5 days. Labor savings are significant too. (Click title for the full story, Slash & profit ).

For still more on the power of outsourcing, see the piece (Up Front - Power of outsourcing ) on Armstrong's guide to third-party logistics providers (read, outsource). And next month, we'll run Armstrong's list of the 20 largest 3PLs who can take everything off your hands from value-added services to reverse logistics.

The next time someone speaks ill of outsourcing, remind them it's all about lower costs and higher efficiencies. And if the performance levels are there to begin, there's no need to outsource. It's that simple.

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