January 04, 2010

Intertek talks about outsourcing in 2010 and how companies can reap the greatest possible return.

The year 2010 will see increasing pressure on companies to explore new approaches to manufacturing, distribution and R&D where outsourcing can be an effective way to increase agility and invigorate performance. Outsourcing began decades ago primarily in the transactional support functions of business to reduce cost and, in many cases, proved highly effective in helping companies focus on core capabilities, enhance customer service and support regional growth. In the last 10 years, major corporations, small and mid-sized businesses, governments and universities have increasingly adopted outsourcing across broader technical functions.

Recent trends are for the outsourced center to provide significant operational support, such as managing vendor and supplier relationships, supply chain, distribution and logistics, R&D, product design, engineering or testing and analytical services. Another trend is to carve out a business unit or product line to be managed by an expert outsourcing service provider. These outsourcing strategies have proven particularly advantageous in gaining access to wider talent pools and geographic reach for science and engineering services.  They have also accelerated product time-to-market , improved quality and business processes, and delivered greater commercial flexibility to scale up or down as market dynamics change.

Looking forward to 2010, pressure will continue to reduce operational costs and avoid capital expenditure on non-core activities. Companies will need to make more aggressive outsourcing decisions in response to changing economic and political factors.  R&D spend is anticipated generally to continue at 2009 levels, however pressure to deliver stronger returns on that investment will reach new levels. Additional funding from government stimulus initiatives is not anticipated to generate long term change.

Competitive advantage will go to those outsourcing service providers that can offer flexibility, superior customer service and better return on capital employed. Increasingly these vendors will be required to show a strong sustainability platform of environmental, social and economic responsibility and to exploit a more “open innovation” business environment.

Intertek Group, a leading international quality and safety services provider, manages a number of large outsourced laboratory programs including projects for Unilever, Citgo Oil, Dow Chemical, BP, Procter & Gamble, ExxonMobil, BASF, TotalFinaElf, Royal Dutch Shell, and Irving Oil.

Intertek is one of the most innovative expert service providers in this market that has successfully adapted a range of novel outsourcing contractual models customized to the priorities of the client. These models can include delivery of

• Predetermined levels of savings in annual operational cost;
• Faster market access and geographical spread of service support from a one-stop shop (in a climate of aggressive vendor consolidation);
• Extension of technical scope of services;
• Benchmarking and optimization of the “in house” function to best class for efficiency, and
• Implementation of burden-sharing programs for more effective return on capital investment, or assistance with change management.

Intertek Group Executive Vice President Andrew Swift believes a successful outsourcing partnership depends on the approach, experience and delivery of the service provider. “There’s no ‘one size fits all,’” he explained. “Not only should the service provider operate efficiently and with best in class cost efficiency; the client should continue to enjoy a better quality of service and information, retain guaranteed access and improved speed of response. Protection of company IP must always be ensured.” It is a ‘no risk’ environment where innovation in the business model is key and where track record of secure delivery of successful projects is critical.

Outsourcing has other benefits as well. Intertek can make the investments that the corporate client can no longer readily justify, as the equipment or function may be one of Intertek’s core services. Intertek may be able to contribute a new and fresh approach to both technology and laboratory management. It also can accelerate international recognition and compliance to international quality standards, which is required for some laboratories to become accepted in their global target markets. In all of this the transferring staff can enjoy wider and faster career development paths in purely technical, commercial or executive management positions.

For further perspectives on outsourcing and Intertek’s approach, go to www.intertek.com/outsourcing/laboratory/

For examples of recent Intertek outsourcing projects, go to www.intertek.com/outsourcing/laboratory/examples/.

About Intertek (www.intertek.com)
Intertek is a leading provider of quality and safety solutions serving a wide range of industries around the world. From auditing and inspection, to testing, quality assurance and certification, Intertek people are dedicated to adding value to customers' products and processes, supporting their success in the global marketplace. Intertek has the expertise, resources and global reach to support its customers through its network of more than 1,000 laboratories and offices and over 24,000 people in more than 100 countries around the world.