Insourcing Brings In More Business

Four years ago, Terry Fulcomer, the supervisor for the Prince William County in-plant, in Woodbridge, Va., had a dilemma.

His half million dollar, six employee in-plant's equipment was fast becoming obsolete. But, catching up and keeping up with technology was an expensive proposition—one that Fulcomer's budget was not inclined to support.

So, Fulcomer got creative and started looking for ways to increase revenue so he could buy new equipment. He found that money outside the in-plant.

"For me, the motivation to take in outside work was not only getting new technology, but to be able to fund that new technology, as well," he remarks.

As in-plants struggle to prove their worth to parent organizations, insourcing has become a great way for them to eliminate down time on equipment and bring in money to offset costs. IPG data shows that 44 percent of all in-plants take in work from customers outside their parent organizations. Still, some in-plants have to be careful about what they insource. Fulcomer, for example, is limited in the kind of jobs his governmental in-plant can accept.

"We do work for other local towns, cities and counties," Fulcomer explains. "We do brochures, maps, newsletters and a lot of public service type work."

The income Fulcomer has received from insourcing has helped him not only improve the in-plant's equipment, it has helped to justify its continued existence.

"If you want to stay in business, then you need to move as much work into your in-plant as possible, otherwise you might find yourself being downsized," notes Fulcomer.

Insourcing Improves Skills

He estimates that between 18 and 20 percent of all the work his shop produces comes from outside sources. Fulcomer has also found that by insourcing, his employees' skills have improved, both in customer service and as equipment operators.

"We get totally different work from the outside than what we get from the county," he reports. "And I think that because the operator is constantly active, they learn how to get the job done more efficiently and they find the short cuts they need to make things happen. As far as customer service, I think we are more aware of what is going on and more responsive."

This belief is shared by Keith Walker, assistant director of Printing Services at Wake Forest University, in Winston-Salem, N.C. Wake Forest's in-plant takes in a small percentage of work from area school systems, local, state and federal government agencies, and non-profit organizations. The 19-employee operation, with a $3.4 million budget, uses the work to increase its revenues, as well as fill its down time.

"It keeps our skills honed, more well-rounded and more diversified," notes Walker. "Our operators are challenged day in and day out. The work is not monotonous, so they don't get sloppy. They don't make as many mistakes, and waste stays down."

A Balanced Budget

For Maxine Glass, manager of Print Services at Regence BlueShield, in Tacoma, Wash., the decision to open her in-plant up to outside work was guided by the need to reach a zero cost basis, she says.

"We were able to bring in around $60,000 the last half of 2001. That is a substantial amount of money for our budget," she says. Outsourcing has "definitely brought the money in during the slow times of year to cover our costs."

It has also had an unexpected benefit: By bringing work in-house, the in-plant—and, by extension, the parent organization—has gotten to know local businesses better, reports Glass. The in-plant often handles digital print work for local commercial printers.

"We have a Xerox DocuColor 2060, and most of the local commercial printers do not have digital capabilities, so they send their work to us," she reveals.

This is especially interesting, since critics of in-plant insourcing often claim local commercial printers will object if in-plants cut into their business. Glass, however, has not found that to be the case.

"Every year, we invite the local commercial printers to an open house so that they can see what kind of equipment we have. They know that we can't really compete against them and they know that we are not out there trying to take their work," she says.

The story is the same even in Honolulu. Glen Tsumura, in-plant manager for First Hawaiian Bank, points out that his in-plant often takes on the work that local printers aren't interested in producing.

"The big print boys don't want to touch the small print quantities that people want to run, so we have the ability to take care of those small runs," he reports. "Our existence is not to compete with local printers. We are here to provide print services to our bank customers at an economical price."

Tax Law

Another issue to consider is tax law, notes Walker, of Wake Forest. Non-profit or governmental in-plants should be aware of state and federal laws that may preclude them from taking in certain outside work.

"All I can do is stress that an in-plant know the legalities surrounding taking in outside work," he says. "We are governed by the A-21, which says we cannot show favoritism in our pricing. I would also make sure that you understand the tax concerns involved with insourcing. If you don't understand the tax laws then you can take a hit, and that takes the wind right out of your profits."

With this in mind, Tsumura recommends partnering with your company's accounting department.

"You need the support of your accounting department. There are a whole bunch of things that are at work when you take on outside work," he points out.

It is a good idea to establish from whom you will and will not take work. At Memorial Hermann Healthcare, outside customers must share the company's mission and vision, be able to meet the financial commitment and be economically stable.

Also, insource slowly, advises Fulcomer.

"Get real comfortable and then go add another one," he says. Word of mouth will ensure that your work load grows. Remember, outside clients are going to require a little more education than internal clients because they may not be familiar with the institution's culture or processes, notes Fulcomer.

Finally, Glass, of Regence BlueShield, recommends that you establish insourcing guidelines.

"We do this on our own terms," she says. "And we make it very clear to the outside vendors that 'we'd love to help you but our work does come first.' "