Maximizing The Value of Insourcing
- December 27th, 2012
- By: Sean Riley
The Atlantic wrote a very informative article on the emergence of insourcing and how they have succesfully leveraged this to reduce costs, increase customer service, bring products to market faster and become more agile as a company. It is a very, very good article and it positions insourcing as a clear trend that many businesses will follow based on the cost results obtained by GE. While it is a great article, it does detail the entire picture.
GE prepared for this insourcing by revolutionizing its supply chain as well. They realized that the GE appliance supply network could be extraordinarily cost effective if they leveraged their competitors volume as well as their own. To do this, GE worked with several retailers to ensure that any company selling appliances to them would have to utilize the GE supply chain. In exchange, the retailer would not have to carry any inventory – less store models. The result: extraordinarily happy retailers, a large cost advantage to GE and a supply network that is strongly positioned.
While insourcing will most likely continue, for all of the reasons mentioned in the Atlantic article and more, to capitalize on it enterprises must realize that it is a disruptive trend that can change the compeitive landscape. Those that are able to capitalize on this change early will find themselves in a much improved competitive position.