INSOURCING V OUTSOURCING - Target Operating Model and Business Case Generation

Overview

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One of LMCG’s clients considered insourcing the majority of their maintenance activities which had the potential for significant cost savings and also to increase service levels due to better control over job completion time.  However, insourcing maintenance activities would involve a large upfront investment to recruit and train staff, introduce management structures, and satisfy compliance requirements.  Furthermore the transition away from the current supplier base is risky as it needs to be balanced with the ramp-up of in-house maintenance operations of which could negatively impact the clients core business.  It was unclear how to setup the operational team and how long maintenance jobs would take, therefore robust business cases couldn’t be created.  LMCG were tasked with defining the target operating model, job completion times, cost models, transition plan and business case.

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Approach

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•Analysed job volumes to determine job types and to determine required skill sets; opportunities to multi-skill operatives to drive efficiencies were identified.

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•Obtained job completion times and the geographical spread of jobs.

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•Determined staff training, equipment and compliance requirements. 

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•Created a target operating model inclusive of organisational structures, spans of control, headcounts etc to deliver maintenance activities.

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•Created a detailed cost model which calculated the overall cost of insourcing.  All assumptions were challenged and validated by working group members.

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•Developed a transition plan showing timescales, tasks and costs involved with the transition. 

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•Generated a business case comparing the potential insourcing programme against current outsourced operations. 

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Outcome

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•The target operating model, cost model, transition plan, and business case showed the client team how insourcing could work on the front line and from a management perspective and the associated costs involved.

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•The client team could now weigh-up the cost saving opportunities against business risks and make an informed decision on whether or not to proceed with insourcing.