Greg Epp

Building Better Manufacturers

the dangers of outsourcing

Why companies outsource

In my article,Why We Should Manufacture in Canada, we touched on the concept that many North American companies choose to outsource their product manufacturing to China in order to stay competitive. The argument was that, over the last 25 years, outsourcing to China was the “easy” solution – it was cheaper, and did not require management to develop the skills to solve the underlying problem, which was an inefficient manufacturing system. In reality, owners were not prepared to eliminate internal waste to increase competitiveness.

Leaders had lost touch with true value of their employees and the importance of developing their most valuable resource.

Your most valuable resource

Over the last 25 years, management has become obsessed with cutting labour cost, leading to a revolving door of under-skilled, temporary workers. But what is the true cost?  Human capital, unlike a piece of equipment, can be re-educated or re-tasked with little effort. Let’s consider the Toyota Production System (TPS). TPS is a shining example of lean manufacturing and the starting place for many North American manufacturers looking to reduce waste in their organizations. One of the founding principles of TPS is that people are your greatest resource. Many Japanese companies have a strict policy of no-layoffs, even when times are tight. Why? People can be trained to do many things in an organization. The longer they work with your company, the greater their knowledge of the operations of your business.  Constant recycling of workers is expensive and wasteful.

If investing in workers and retaining them for many years is critical to the health of your operation, then selecting the right people to invest in must be of the utmost importance. But a common complaint heard amongst employers today is that they can’t find good workers. Let’s tackle why.

Leadership

In his book, Turn the Ship Around, L. David Marquet explains how he, as Captain of the USS Olympia (SSN-717), the worst performing nuclear class submarine at the time, is tasked with “turning the ship around” – cleaning up the worst ship in the fleet. He challenges the standard military “Leader-follower” model, in which leaders issue commands and subordinates follow them. Realizing that the Leader-follower model is designed to enforce control, not encourage people to think, he devises his own model.

Just as TPS encourages the individual to make small improvements to their work stations, David enacted “I intend to” statements, granting individual sailors the right to state what action they intend to take, instead of waiting for the order. The “I intend to” statement still gives the captain the ultimate authority to accept, modify, or cancel the action, but grants the sailor both responsibility and freedom to think on his own.    

Much like the complicated systems in modern military combat, today’s companies use complex equipment to manufacture.  If your employees need to think on their feet and solve complex problems on the fly, you need to encourage them to be leaders. To produce the best workers, you need to create an environment where they feel they can drive the ship. Instructing the captain that you intend to dive a nuclear submarine would be a rush for anyone. But being ordered to? Not so much.

What freedoms do you grant your team? Are they being encouraged to find solutions, or are they waiting for direction? Do they have the opportunity to take on more responsibility in the form of promotions or increased tasks?

To summarize     

When you outsource your manufacturing, you are trading short-term profit for long-term struggle. Outsourcing is a lazy approach to manufacturing that results in loss of human capital – your most valuable resource – which makes the company vulnerable to more skilled competitors.

Better leadership, combined with the desire to reduce inefficiency, will net better results in the long-term. It’s hard work, requiring short-term sacrifice, but will add value to your company over time as your team is able to engage in personal growth and become stronger.

Written By Greg Epp

About the Author

Greg Epp

I am the owner of Adventure Marine Manufacturing Inc. and currently spend my time building my business and bringing awareness to companies about the advantages of restoring or improving their current manufacturing capabilities.

A red seal certified Millwright, experienced welder, machinist, and fabricator, I have over 17 years of trades experience in many sectors including automotive parts manufacturing, mining, sawmills, construction, custom metal fabrication, and CNC machining.

A former member in good standing of the Canadian Forces, I proudly served as a paratrooper in the 3rd Battalion Princess Patricia’s light infantry – overcoming huge physical and psychological barriers.

A professional leader and team player, I am always looking for a new obstacle to overcome. I’m passionate about improving manufacturing and would like to help solve your greatest challenges.

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