by Jack Wentworth
Today's managers are facing an increasing magnitude of pressures for change. Over a century ago, we endured the Industrial Revolution that changed many countries, and especially the United States, from an agrarian society to an industrial society. Today, we are under the same level of pressure to change from a domestic economy to a global economy which, in turn, is causing societal as well as political changes. Arguably, the most significant issue facing business management as global competition increases is the concept referred to as outsourcing.
Dominique Roux, noted French business scholar, author and business consultant, recognized the growing importance of this hitherto unseen phenomenon he refers to as globalization. This book traces the environmental changes that generated globalization and its management consequences. Of particular importance in the United States is the issue of outsourcing in its different forms, which, in addition to being an economic issue, is becoming a political issue. Outsourcing is increasing dramatically and needs to be better understood and placed in some kind of conceptual structure – a logical and practical framework. Roux does just that.
Roux does this by giving outsourcing the theoretical base that it needs and deserves. This book is an excellent blend of theory and practice and helps us understand the reasons for what we see happening today. If management better understands outsourcing, it will be less of a threat; but rather, will open new opportunities to meet ever increasing global competition. In other words, if we truly understand the evolution of outsourcing, we are in a better position to capitalize on a phenomenon that was inevitable.
In the first two chapters, Roux lays the groundwork for what he refers to as worldwide hypercompetition. He helps the reader understand that this is not a condition brought about by large business firms, but by decisions made by governments following World War II. Hence, these decisions were probably inevitable as we examine history and its corresponding economic theory that led us to that point in time.
Clearly, two world wars made it obvious that a country would not live within its own borders. At the same time, other critical factors included dramatic changes in technology, communications, transportation and logistics. Roux points out that the result is an environment of hypercompetition within which firms must compete. This resulted in new pressures on management of these firms. The systematic striving for efficiency becomes a requirement for survival by maintaining a competitive edge. In turn, this leads to the need for new management tools, techniques and approaches.
Roux provides a clear and logical base for these developments and offers new management approaches to achieve greater efficiency and more flexibility as well as greater cost effectiveness. These approaches include greater management attention to such issues as a company's core business (competencies), supply-chain management, subcontracting, outsourcing, and even the development of a network of companies.
This background provides a more meaningful understanding of what is happening in a very competitive global economic environment and why it is happening. This understanding becomes even more important as Roux identifies, defines and compares these approaches and places them in a strong strategic framework.
All of this leads to the major theme of the book and a whole new level of strategy for the business firm that must compete in this dramatically changing environment. For the past few years, I have had the privilege of serving with Dominique Roux on the advisory board of a firm that is now named International Outsourcing Services (IOS). We have had the unusual advantage of witnessing new strategies develop in this competitive environment, not only at IOS, but within firms with whom IOS does business. Roux felt that change was happening so rapidly that there was a need to examine these changes in the context of management theory to see why it was happening and evaluate the next developments. Roux saw the value of a new concept of management that was developing and wanted to share it through a book. He also saw the need for bringing together some of the management theory that was relevant. I agreed to do some editing for the English version and write this foreword.
What we saw happening was that the supply-chain management was becoming critically important in this changing global environment. It was becoming a vital part of the firm's overall competitive strategy. For example, most successful firms clearly recognize the need for strategic marketing on the "downstream" side of the firm. Now, the need for strategic procurement on the "upstream" side of the firm takes on greater importance.
As IOS looked at these management needs, it called for a new level of commitment to a strategy that went beyond subcontracting or contract manufacturing or outsourcing and needed its own identification. That's when the term Laborgistics® was created.
It would be very easy to pass this off as a new management buzzword or just a new name for old practices. However, I feel (and, obviously, so does Roux) it is much more than that – it is a strategic way of thinking and conceptualizing. It brings the market into the upstream side of things to a much greater extent. To a much greater degree, strategic procurement becomes more significant and requires tighter integration with strategic marketing on the downstream. As Roux points out, it also has obvious implications to the organization structure of the firm. It is this kind of corporate thinking that is needed, perhaps required, as we move into an increasingly competitive global environment.
Perhaps it would be helpful to understand some important but subtle distinctions between simple outsourcing and Laborgistics:
- Outsourcing tends to focus on cost cutting - Laborgistics focuses on generating new revenue as well as cutting costs to identify and/or take advantage of new market opportunities.
- Simple outsourcing tends to have a survivor focus - Laborgistics has a long-term, strategic focus.
- Regular outsourcing infers "working cheaper" - Laborgistics infers "working smarter."
- Outsourcing is often with an individual vendor - Laborgistics is often involved with multiple vendors or, as Roux calls it, a "network of partners."
- Outsourcing may send some jobs overseas - Laborgistics may send some jobs overseas, but it may also create new strategic jobs both in the domestic country and overseas.
As a final thought, I want to call attention to the Glossary of a few management concepts at the end of Chapter V. This is an excellent compilation of practical definitions of business concepts that are, and will play, vital rolls in both our business and political lives. It's a good way to "get up to date" quickly.
Jack R. Wentworth
