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Nathan Klomp's presentation for the Closets Expo 2011, titled "The Value of Outsourcing"

Nathan Klomp's presentation for the Closets Expo 2011, titled "The Value of Outsourcing"

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Closets Expo PowerPoint Closets Expo PowerPoint Presentation Transcript

  • The Value of Outsourcing Presenter: Nathan Klomp
  • My background
    • Worked in trades through college
    • BS Business administration: Management
    • Installed Custom Closets for a small company
    • Designed closets for California Closets
    • Managed a sales staff
    • Sales and Marketing Manager at JB Cutting
    • Completing MBA/MSF
    • Other endeavors: Elected councilperson for the City of Rochester Hills, MI
  • Requests
    • Silence cell phones
    • Please fill out the sign in sheet
    • Questions at the end
    View slide
  • JB Cutting, Inc View slide
    • 40 year history
    • Thermoforming components
    • Cutting, machining and edging
    • In a growth phase
    • 50% of our business comes from closets
    • 10+ year relationship with hundreds of closet companies
    • Healthcare and store fixtures
  • The Hook
    • Introduction
    “ Stay committed to your decisions, but stay flexible in your approach.” Tony Robbins
  • The Value of Outsourcing
    • The strategic advantage of outsourcing
    • The environmental conditions and how they should affect the decision to outsource
    • 2 case studies analyze when real life examples help explain the potential advantages of outsourcing
    • When outsourcing could be the wrong decision
    • How outsourcing affects our industry and our businesses today
    • Not talking about India or China!
  •  
  • How is the economy affecting your businesses?
      • Lean operations
        • Six Sigma- zero defects with financial targets
        • Lean workforce- more with less
        • Focused on value added tasks in the operation
      • Highly competitive
        • Not amateurs- companies are looking at all areas of the business to cut costs
        • Competing on price- how low can you go?
      • Holding steady
        • Not making many acquisitions
        • Not hiring handfuls of people
    •  
    • My inspiration for this session
    • “ Before we sit down, I have to tell you both that I’ve never been a huge fan of outsourcing. I usually try to do as much as I can in-house”
  • The Value of Outsourcing
    • Outsourcing
    • “ The procuring of services or products, such as the parts used in manufacturing a motor vehicle, from an outside supplier or manufacturer in order to cut costs .”
  • The history of outsourcing
      • The Industrial Revolution
      • - gives birth to the domestic outsourcing that we all know today.
      • Early 1900s
      • Marks a period where companies begin to grapple with how they can exploit their competitive advantages to increase their markets and their profits.
  • History of outsourcing
    • Scientific Management
    • Fredrick Taylor: (1856-1915) introduces Scientific Management
    • - Highly analytical look at labor management
    • - Time and Motion Study : viewed the separate components of work functions
  • History of outsourcing
    • Nothing new
    • Humanity: We’ve always outsourced
        • Fur trade: early American history, Mountain Men
        • Jeremiah Johnson: willing to brave the conditions.
        • Early civilization: shared resources and specialized
        • Households: tasks and responsibilities
  • History of outsourcing
    • Jeremiah Johnson
  • Outsourcing in the modern world
    • It was not until the late 80s that outsourcing was recognized as a business strategy
    • Suppliers start becoming bigger than the companies that they supply
  • Look inside a manufacturing company
    • Shop video
  • Why do companies outsource?
      • To reduce risk
      • -fixed expense vs. period expense : You’re in control!
      • Economic advantage
      • -maybe it’s simple math
      • - opportunity costs
      • 3. Simplicity
      • -it’s easier
      • Capital investment constraints
      • -cash flow or lack of credit
  • Reasons to NOT outsource
      • Risk reward tradeoff .
      • -why give it a way?
      • 2. False belief of “the more the merrier”
      • 3. Keep them busy
      • -what else are we going to do?
      • Long term strategy
      • -corner the market
  • Favorable environment for outsourcing
      • Economic uncertainty
        • 2003 uncertainty vs. 2008 uncertainty
        • industry uncertainty
        • up or down
      • Fluctuating labor market
        • Outsourcing is favorable when labor is expensive
      • Limited resources- money is expensive .
        • financing at 10% apr
        • have the cash but other opportunities exist
  • Favorable environment to make
      • Economic sustainability
    • period of significant growth
      • Steady labor market
    • are additional people available?
      • Available resource
      • money is cheap- interest rates are low
      • Tax incentives
      • last year the IRS allowed you to write off all of your depreciation up-front on any depreciable assets purchased during that year
  • Core competency
      • Ask yourself: What is your core competency?
      • (your bread-n-butter)
      • Is the new make decision part of what your organization does and does well?
      • What’s your culture like?
        • For example, is it high-process function or is it a technical custom function?
        • How do your line workers feel about the new function?
        • S.W.O.T analysis
  • What to outsource
      • Non core-competency
      • What are you good at? What aren’t you good at?
      • Products or services that require specialization
        • Granite- It’s a whole new animal
        • Tradesmen- Painters, electricians, plumbers
        • Accountants- Specialized education. You need to be current. State licenses.
        • Shelves, partitions, hardware: Need a company to specialize in efficiency
      • Services or products that require large investments
        • TFM: Presses are expensive
        • Thermoforming: Wemhöner press vs. Ferrari
  • Relates to our industry
      • We can purchase machinery- CNC equipment
      • Hire employees- Designers, Installers
      • Designate an internal marketing position
      • Contract a payroll company
      • Is the workload consistent? Will it stay consistent? Can we do it more efficiently?
  • Suppliers and forms of outsourcing in closets
      • Hardware : Hafele, Sidelines, Baer supply
      • RTF Doors : JB Cutting, Inc
      • Partitions and shelves : Closet Works, Organizers Direct, JB Cutting, Inc
      • Labor : sub-contractors, independent sales reps
  • Case 1:
      • Sunshine Cabinets has been making drawer boxes and cabinets at their shop for a number of years. The owner of the company is looking for ways to improve his profit margin without making additional investments.
  • Case 2:
      • Cool Closets recently sold a closet and the general manager is trying to make a decision as to whether or not she should make the parts in-house or outsource them.
  • How do we know we’ve made a mistake by choosing NOT to outsource?
      • We’re overstaffed and live in constant fear of “will we have enough work this week/month?”
      • Our workers are overstretched and now we have more tasks than we can handle – pushing installs back, losing customers. “where’s my closet!”
      • Our liabilities are increasing and our bottom line is not improving
      • – all risk and no reward. It’s not profitable!
  • How do we know we’ve made a mistake by choosing to outsource?
    • We find after some investigation that, all things considered, we could be doing it cheaper in-house
      • Lost opportunity to corner a market as a one-stop shop
      • Lost profits or lost revenue at crucial times
  • Conclusion
    • The decision to outsource depends on:
        • How it affects your business - What are you good at?
        • -you’ve GOT to know that!
        • Environmental conditions
        • -it’s all about timing the market!
        • Opportunity costs
        • -what could you be doing otherwise?
    • Know what you’re working with and strategize accordingly.
  • Questions ?
  •  
  • Discussion points
    • Bad experiences with outsourcing?
    • Good experiences?
    • Are you thinking about your business differently?
  •  
  •