Question

1. Production Labor Sourcing for Supply Chain Management* Over 75 percent of U.S. manufacturers have been reported to outsource some of their business functions. A shift in offshore outsourcing has returned some business activi- ties to the United States even as cost reduction pressure still challenges most U.S businesses. Brook Medical Supplies (BMS), a manufacturer of medical supplies and ambulatory kits, recently ended outsourcing operations overseas as a competitive mea- sure to improve quality and reduce costs. BMS instead selected a cost reduction project that outsourced semiskilled labor locally. The labor-sourcing approach reduced overall costs below the offshore program, while maintaining complete oversight of product quality. The positive results in cost reduction prompted BMS to expand the labor- sourcing initiative beyond its production positions. BMS now uses labor sourcing for semiskilled labor in its material handling (shipping and receiving), staging (tow motor drivers), maintenance, and waste handlers without displacing any existing employees by moving them to other departments in the plant. With the responsibility to hire, train, and supervise this group of semiskilled laborers, BMS has been able to increase efforts in core areas of increased quality, efficiencies, and product improvement Stor-Pak Distribution Center handles 90 percent of BMS' New England distribu- tion, including assembly and kitting for their drug testing kits. In addition to their customer-supplier relationship, Stor-Pak partners with BMS as a Best in Class and benchmarking mentoring through a national association of U.S. manufacturers and distribution centers. As part of BMS' supply chain management integration efforts, they have recommended to Stor-Pak that they evaluate alternatives to expanding their labor force with permanent employees. Stor-Pak is evaluating three alternatives includ- ing hiring permanent warehouse employees, contracting with temporary employment agencies for expanded labor, and contracting with a specialized labor-sourcing com pany similar to the contract BMS secured for their production and warehousing opera- tion. Stor-Pak has been gathering internal data on labor costs for permanent employees and has a large pool of temporary employment agencies that responded to their RFP Only one proposal was submitted that was identified as a specialized labor-sourcing company Bethel Consulting Services (BCS) is a third-party labor-sourcing company with expertise in screening, selection, training, and supervision of semiskilled warehouse associates. BCS presents a "company within a company" or vendor onsite service with competencies in training for warehouse positions in material handling, pick and pack assembly and kit making that reduces the learning curve time and improves quality of work. Their proprietary competency-based hiring system and onsite supervision result in lower tardiness, turnover, and safety issues. BCS' specialized staffing system starts with an assessment of required skills and activities of the warehouse operation and then drafts standard operating procedures (SOPS) for training and performance evalu- ations. Their data and performance-based system allows performance incentives for BCS employees and gain sharing opportunities for contract partners. BCS has data necessary for developing a business tion centers can use to present contracting with a specialized labor-sourcing company The business case compares BCS cost and performance measures to hiring permanent employees and contracting through temporary agencies. The business case presents data reporting productivity gains and a reduction of overall labor cost by 20-40 per- cent. The data reports retrieval, assembly, and kit making), improved performance measures packing efficiencies), and improved safety (reduced liability and claims). The BCS system will allow distribution customers to redirect efforts in supervising semiskilled labor to case that warehouses and distribu- an increased quality of work (reduced errors in storage and (picking and supervising skilled labor and focusing on competencies and other lean core cost saving priorities. Discussion Questions 1. How could contracting with Bethel Consulting Services advance Stor-Pak's posi- tion as a world-class supply chain partner for Brook Medical Supplies and other customers?

Answer 1

Contracting with Bethel Consulting has many advantages like it can reduce the labor cost by 20 to 40% , increased quality of work , lean cost saving priorities, skilled labor supply and a specialized labor sourcing company.

It will also provide edge to Brook Medical supplies in terms of access to competency based hiring, onsite supervision and specialized staffing programs. It also gives unique training and development programs for the organizations and other customers. Hence, it will be a good choice to be a consultant contract with BCS.