Henry Ford once said, “There is but one rule for the industrialist, and that is: “Make the highest quality goods possible at the lowest cost possible, paying the highest wages possible.” Many present-day industrial giants are heeding this sage advice by venturing overseas — taking the chance of poor quality products, cutting American jobs by the thousands and paying for labor with pennies — for the purpose of cutting costs.
But what if there was a way to follow Mr. Ford’s sound advice of assuring quality, reducing costs and rewarding employees with wages they deserve while maintaining in-house visibility? What if there was a cost-cutting option available for companies looking to retain business in their current locations vs. administering operations in a foreign facility thousands of miles overseas?
| MPO offers similar substantial cost savings of offshoring, yet it gives control of manufactured products and employees to an outside resource within a company’s facility. |
A Fortune 500 tire manufacturing colossal found just that when it was introduced to an innovative concept called Manufacturing Process Outsourcing (MPO). While looking to cut costs, maintain their outstanding quality and focus on core competencies in its current facilities, the manufacturer took advantage of the MPO concept by outsourcing a portion of its tire manufacturing process to a third party within its own facility.
Manufacturing Process Outsourcing is an innovative alternative to offshoring and may surprise many who are familiar with the term “outsourcing.” The concept is quite different. While most would assume outsourcing company functions involves an outside vendor operating in a different location, the intent of MPO is to “run a business within a business.” It involves outsourcing manufacturing functions to a vendor who actually operates inside the company’s facility, while guaranteeing the quality of a product.
The advantages of MPO allow a company to have total visibility within its facility and to be hand-in-hand with the outsourced provider while it maintains a managed, quality-driven process facility. This provider actually takes total responsibility for the product, guaranteeing superior quality.
MPO offers similar substantial cost savings of offshoring, yet it gives control of manufactured products and employees to an outside resource within a company’s facility.
What astounded the tire manufacturing giant were the powerful results MPO was able to obtain. For example, the company obtained less than six issues in product quality, employee turnover was less than 5 percent and absenteeism was less than 3 percent.
The most impressive statistic Manufacturing Process Outsourcing provided the company, though, was cost savings of 40 percent.
As MPO proved to be a success, the tire manufacturer quickly spread the partnership with MPO expert The Holland Group to seven locations in only two years.
The innovative concept has not only allowed substantial savings in wages, employee benefits and workers’ compensation, but has protected the company’s world-class reputation for quality.
For example, Quality Programs, which encourage employees to concentrate on quality within their facilities, have been implemented. MPO, along with the innovative program, has given the company the ability to concentrate on its core competencies.
The ability to service industries with the MPO concept provides companies the ability to achieve substantial savings and a competitive advantage over companies who are considering offshoring to a foreign nation.
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