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Closets Expo PowerPoint


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

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Closets Expo PowerPoint

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