I recently read an article that incorrectly defined outsourcing as offshoring. It might be helpful to some readers to review these terms and their proper application.

Outsourcing is the use of resources outside of one’s own organization to accomplish a business need. These resources could be individuals or businesses, and they may be located in your country or around the world.

Offshoring is the use of resources in a different country. These resources may be part of your organization or they may be a separate organization. Offshoring is typically chosen to take advantage of lower labor rates and/or specific and unique regional capability.

Let’s use some examples.

Example 1: You are the CEO of YourCo Inc. YourCo needs to manufacture your new product, the Widget2010. The challenge you face is that you do not own a factory. Your engineering group has designed the Widget2010, but you have to outsource the manufacturing of the product to someone who specializes in manufacturing. You have many choices as to the size and capability of the manufacturer you choose. Regardless of where the manufacturer is located, you have made the decision to outsource. If the manufacturer is in a different country, you have chosen to offshore. If the manufacturer is located in your own country, you have not chosen to go offshore.  Again, in either case, you are outsourcing.

Example 2: Again, you are the CEO of YourCo Inc. YourCo needs to manufacture your new product, the Widget2010. Your factory in your own country cannot add the product to their mix because they are running at capacity. YourCo has another factory, however, in another country. When the decision is made to manufacture the product in that non-domestic factory, it may be said that the product has been offshored, but not outsourced.

Offshoring is still very controversial because many believe it is the shipping of jobs “overseas.” Outsourcing is not as controversial because very few companies still try to be fully vertically integrated doing everything in-house. Therefore, most companies look to outside suppliers and manufacturers to complete their supply chain. This is the reason that outsourcing (literally, sourcing outside our organization) is widely accepted as smart business practice.

One myth that needs to be exploded for those considering either outsourcing or offshoring is that you will need little or no business structure to manage your outsourced or offshored resources. The truth is that you will still need purchasing experts, program managers, and quality control personnel to effectively manage your offshore and/or outsourced resources.

Thanks to John over at Fedcor Global, I have become a satisfied user of YouSendIt.com, a service that makes sharing large files a snap. Those of us in the manufacturing and sourcing industry have frequent needs to send and receive large files. For years I have used file transfer protocol (ftp) to upload and download large files. While ftp will remain a weapon in my arsenal, I now find YouSendIt to be much easier.

There are paid subscriptions available that will make sense for some users, but so far the free account with the 1 GB limit has worked for me. I simply zip up the files I need to send into one zip file and use the interface to send it to my recipient. The interface is very much like Outlook or any other email client. When I have successfully sent the file, my recipient recieves an email with a link that automatically downloads my file to their computer. It is elegantly simple.

I will be eager to hear of other solutions to sending and receiving large files. Do you have something that works for you?

As all businesses must do, we have planned for the future, adapted as we have encountered challenges, and looked back to learn from our mistakes.

So, in the spirit of commemorating this milestone, we ask three questions.

What have we done wrong?

As manufacturers’ representatives, we are only as good as the suppliers we represent. Our function is to have a strong working knowledge of our suppliers’ capabilities and to find customers in need of those capabilities. When we match up our customers with our suppliers, we have done our job.

The biggest mistake we made early in our growth was to select a couple of suppliers that were not the right fit for us. I will refrain from saying they were bad suppliers and just stick with they were not right for us. Because we live and work in a specific geographic territory, it is vital that we maintain our reputation as a company that does what it says. In other words, we must be trustworthy. When we signed on to be the sales representatives of a couple of firms whose capabilities were not as great as their brochures depicted and whose cost structures did not allow our customers to meet their goals, we had to make changes. We made those changes…promptly.

What have we done right?

For the most part we have selected very good suppliers with strong capabilities and with institutional commitments to do right by their customers. Three shining examples of this to me are South Bay Circuits for electronics manufacturing, Fedcor Global for user input devices and many other services, and Extrusion Technology (X-Tech) for aluminum extrusion and mechanical systems. Each of these three suppliers has strong technical people in place to support our customers, well run factory operations, and customer support people who understand what it takes to win and keep business.

All of our other suppliers are also excellent manufacturers that add value to our customers. Again, as a manufacturers’ rep firm, we are only as good as our suppliers. Our suppliers are good.

Where are we going?

In keeping with what we have done right and wrong, our future depends on our continuing to offer an ever increasing complementary lineup of custom manufacturers. We frequently field calls from suppliers interested in representation in Texas, Oklahoma, Arkansas, Louisiana, and New Mexico. We treat each call seriously and make a determination about whether that firm’s services fill some missing niche in what we currently offer to our customers.

When business conditions allow us to expand, we plan to add additional outside salespeople to take the message of our suppliers into the broader marketplace.

Also, we continue to lay the foundation for growing our presence in the contract pharmaceutical manufacturing, nutraceutical manufacturing, and biotech manufacturing markets. Dr. Sam Lockwood is developing our corporate strategy on these fronts.

Conclusion

As we commemorate these three years since we first hung our shingle, we continue to focus on fulfilling our promises. That is what it is really all about. Our customers are our most precious resource. This is the reason we have associated with excellent suppliers and continue to build a strong line card. By so doing we become a valuable part of our customers’ supply chains. As we recurrently fulfill our promises, we engender trust in our customers. When that happens, our customers, our suppliers, and Baselodge Group all thrive.

Thank you to all of our clients and suppliers for making these first three years exciting and fulfilling. We look forward to many more years of service.

Disclaimer: I am well aware of the historical and current conditions in some factories and that many factories have been and are places of injustice for workers. The impressions I share in this article are not intended to deny such problems or minimize them. The types of factories I am describing here are the ones run by the kinds of firms Baselodge Group represents and those I have personally toured.

I still remember the first time I stepped into a factory and went on a tour. While the workers who were “cranking widgets” may not have agreed, I thought it was the coolest workplace I had ever seen. My first factory visit was actually at a plastics injection molding facility. I visited on a cold winter day that seemed to accentuate the energy and warmth of the factory. The bright lighting and hum of molding presses dropping out newly formed parts testified that something important was happening.

Depending on your definition of a factory, I actually had already been in one many years before. My second job out of high school was working for a polyethylene facility in the Houston area. This was a large plant producing the plastic granules and pellets that were used in injection molding factories just like this “first” one I visited many years later. Having worked in a polyethylene plant, there was a nice completion to visiting the injection molding facility and seeing those pellets being vacuum filled into the top of the molding presses and then feeding into the augers for melting and injecting into the injection tools.

Since that first visit to the injection molding facility, I have had the privilege of being in many factories. I have toured printed circuit board factories where bare boards were produced. My office for a time was basically in the IBM Austin board house which was purchased by Multek. I have also been in many circuit board assembly factories both in the the US and Mexico. Many of these factories also do complete product builds. I have also had the privilege of touring a die casting factory and a very high end medical equipment facility where the products being manufactured were around $500,000 each. One of the most interesting facilities for me was a pharmaceutical factory that I visited along with our VP Dr. Sam Lockwood.

So what is it about “the factory” that impresses me so much? Why is there what I call the joy of the factory?

Organization

Some factories are better organized than others, but every factory has to have some level of organization in order to produce goods. When I tour a new factory, I always enjoy listening to the managers and employees discuss the layout of the machines, the number and type of shifts, and the changes that have recently occurred. The opposite of organization is chaos. Chaos inhibits productivity while organization enables productivity.

Industry

What I mean by this is that factories are places where humans are industrious, and I usually come away energized myself. Now, I have been in factories where there was not enough work, where the machines were idle, and the people were scarce. There was little noise and little industry. Those types of factories are sad because the artifacts of better times are everywhere, but the lack of activity reveals that things have gone wrong. Active working factories, though, are encouraging and exciting.

Documentation

Facilities that are ISO certified (or that hold other certifications) have to be very meticulous about their documentation and their processes. Many factories have automated extensively while others are still primarily using paper, file cabinets, and white boards. Documentation is vital not only to producing quality products but also to tracking problems and resolving quality issues.

Technology

As with documentation, some factories are more technologically advanced than others. I always enjoy watching the technology in action. Whether it is a high speed drill system drilling thousands of holes per minute in circuit boards or robotics in a plastics plant, the technology employed can give a factory an edge and really improve productivity.

The Dignity of Work

This is a bit philosophical, but there is a certain dignity that I find in the factory. Most people agree there can be dignity in any kind of work. In the factory I see men and women contributing to the production of something tangible that has a use in the world. I have been in factories that manufacture plastics and electronics for toys. It is true that those toys will make money for the factory that produces them, the distributor that moves them, and the retailer that sells them. Those are all good things, but the toys produced sell because they are wanted. They are wanted because they have the ability to make children happy and possibly to help in their development. The same thing can be said about most products that are produced in the factory — they have a purpose. The lowest paid line worker has a hand in producing these valuable products, and there is dignity in that.

In his book Maverick, Ricardo Semler retells an old business parable:

“Three stone cutters were asked about their jobs. The first said he was paid to cut stones. The second replied that he used special techniques to shape stones in an exceptional way, and proceeded to demonstrate his skills. The third stone cutter just smiled and said: ‘I build cathedrals.’”

Some people in factories are just going through the motions I suspect, but I get the sense that most of them find dignity in building cathedrals.

Teamwork

No finished product is created from raw materials without a lot of teamwork. Much of the teamwork is outside of the factory itself. It includes the electric power plant, the water treatment facility, and other utilities that are contracted for by the factory. It also involves the truckers who transport raw materials to the factory and the suppliers that make up the supply chain of equipment and raw materials. The financiers, investors, and entrepreneurs who provide the working capital are critical. The janitors, the managers, the engineers, the machinists, the carpenters, the operators, and everyone else that works in the factory is part of a large team working together to make something happen.

Conclusion

When I visit the factory, I am usually with a prospective customer that is considering contracting with that factory to have their product contract manufactured. As I walk the factory with the prospective client, the plant manager, and engineers, I often wonder what the line workers think about us and what they think we think about them. I am not sure what they think about me/us, but I view their work with the understanding that I am part of their team. If it were not for them doing what they do and offering a valuable service to the customer, I would have nothing to sell. I admire the work they do and am grateful to be able to win business for them to help them continue doing their part for the team.

I am a fan of the factory, and it is my hope that in the years ahead our factories will grow and prosper as they produce the goods required by our economy. As that happens, more and more people will be able to find dignified work that will allow them to take care of their families and buy the goods and services that everyone else produces for them.

The first thing I did to implement Merlin’s approach was to create a .DMZ folder in Outlook. I then moved all of my huge backlog of emails from the inbox into that folder. Just like that I was at a zero inbox. Staying there requires that I stop just “checking” email and start “processing” email, as Merlin explains. I am also going to be using Outlook’s Task features a lot more in the new year.

As Merlin states many times, this approach to email is an outgrowth of the Getting Things Done book by David Allen. That book is on the top of my “to read” list for the new year.

Merlin Mann’s website on this topic is www.43folders.com/izero

The more I learn about Merlin Mann, the more I am impressed.

I wish all of our readers, customers, suppliers, and friends happy holidays and a prosperous 2009!

The role of manufacturers’ reps (MRs) is well understood in those industries. For example, Baselodge Group represents electronics manufacturers  in the EMS side of our business.  The firms that we represent understand well the role of the rep. In fact, in nearly all cases, the manufacturer found us and convinced us to represent them and sell their services to our clients. Likewise, most of our customers are familiar and comfortable with the role we play. We call on the customer and offer them at least seven contract manufacturers with a variety of manufacturing services. Because of this we are seen as a valuable resource to our clients.

In the realm of contract pharmaceutical manufacturing and contract nutraceutical manufacturing (a realm that combined we refer to as pharmasourcing), however, manufacturers’ reps are an unfamiliar beast. In the interest of clearly communicating our role, let me state what you get out of it.

Drug Development Companies

If you are a pharmaceutical or nutraceutical drug development company, an MR can help you by offering a variety of contract chemistry suppliers, contract pharma manufacturers, contract packaging suppliers, and even R&D firms and consultants to help you with your trials and the approval process. The key is that the MR knows the capabilities of these suppliers and has already done the due diligence to be sure that the suppliers are quality firms with solid track records. The MR’s reputation is on the line with each firm they represent.

Can’t you find these services at a trade show? Yes, but you may have the need before the next big show. Also, there is a lot of time expended in investigating the many suppliers out there for the service you need. Can’t I find what I need on the web? Perhaps, but again the research is time consuming and cannot take the place of the due diligence of having first-hand knowledge of the facility, capabilities, certifications, etc. The MR has selected their suppliers in a logical way so that we can offer you a “line card” of quality suppliers that can meet your needs. In this way we become a valuable resource to our customers.

Contract Pharma Manufacturers

If the drug development company gains access to quality suppliers by using an MR like Baselodge Group, what does the supplier gain by using an MR? The supplier gains a sales organization that is expert in their geographical territory. We know the firms that are in the process of developing new products and that may be in need of contract manufacturing services. We stay up on the firms in our area that are working on new APIs and formulations. Additionally, we offer our sales expertise to the supplier on a commission basis. This means that, in most cases, all of this sales capability comes with no fixed costs, only variable costs. We get paid a commission when we find a customer that is a good fit and whose business you win. If we don’t sell, we don’t get paid. We are in business to get paid, so we work hard to win business for our suppliers.

Conclusion

The well established role of the MR in many industries is not yet well understood in the pharmasourcing space. We are convinced, however, that both drug development companies and contract pharma suppliers will find value in making use of the manufacturers’ rep model. We predict that the early adopters of the MR model will benefit from it and that in time the MR model will be as widely accepted in the pharmasourcing industry as it is in so many other industries.

You can also subscribe to our RSS feed in order to stay current with our content. Your questions and suggestions are welcomed via the Contact Us button at the top of the page.