By Kevin Meyer
It's starting to be a trend… a good one for a change. Companies rethinking their outsourcing strategy after realizing how traditional accounting puts the blinders on total cost… and opportunity. A hat tip to regular reader Jason for shooting me this article on NCR.
trend that had been sweeping America’s electronics industry for more
than a decade. By shutting its own factories in Canada and Scotland and inking a
five-year deal with a contract manufacturer to make ATMs for North
America, the company assumed it could cut costs.
And the inevitable happened.
and costly exercise” that led to product delays and upset customers.
NCR makes ATMs at its own plants in China, Hungary, and India. The
devices are also assembled in South Carolina and offshore in plants run
by Flextronics, which in 2007 acquired Solectron, NCR’s original contractor. Among the
headaches: Because ATMs are so complex, NCR engineers often had to jet
around the world to sort out production glitches and design changes.
This led to delays just as NCR was launching a line of ATMs that
simplify making deposits and verifying transactions. “By outsourcing,
we just couldn’t move as quickly,” Nuti says. E.C. Sykes, Flextronics’
president for industrial products, says: “We did have some bumps with
this product line.”
So what is NCR doing?
vanguard of a shift in corporate thinking that could bring skilled
manufacturing jobs back to the U.S. Not only will NCR once more build
all automated teller machines in-house, but it will also supply North
America entirely from an 800-worker plant in Columbus, Ga. Before, some
ATMs sold in the U.S. came from China and Brazil.
Why would they do that? Doesn't it fly in the face of the quest for "cheap labor"?
Nuti and his team decided they had to halve development times of
intelligent, easier-to-use ATMs—currently 12 to 18 months—and
consolidate production. Because many ATMs are custom-designed, NCR
wants buyers to be directly involved in development.
The plant is just a two-hour drive from three key spots: NCR’s main
customer service center, its innovation hub, and its new headquarters
in the Atlanta area. “We want quantum-leap
changes in our cost structure,” Nuti says. “To effect that change, you
have to control your destiny.”
Yes, value is created by more than just a pair of hands. Chasing low labor costs ignores many other costs, values, and especially opportunities inherent in any supply chain. Congrats to NCR for realizing that the traditional P&L and balance sheet is just one part of the picture.