As cost-cutting programs have been carried out in recent years, they have been accompanied by numerous initiatives in the direction of standardization and lean management. Such measures have long-term impacts on the company which penetrate more deeply into its structures with every new product development. But focus is shifting back to creating value rather than on return on equity. Our study shows that insourcing can be an opportunity in the crisis.

More than ever before, the battle cry in this current financial crisis proclaims: cash is king! Commitment to this principle leads to growing pressure to convert fixed to variable costs, divestment, and staff reductions with the aim of improving liquidity. Even when the crisis has passed, capital costs will not return to the favorable level of the past. If we look ahead to the time after the crisis, factors such as raw material, environmental, transport costs and rising labor and capital costs will be at the forefront of concerns.

The calculation of the total cost of ownership for purchased services should be re-evaluated in view of these trends. The important point here is the differentiation between the short-term effects of the financial crisis and the long-term effects. While the liquidity must be secured in the short term – e.g., by careful management of credit lines and expenditures – the long-term goal must be the reduction of costs. In the past, cost-reduction measures were initiated on short notice in the form of conventional cost-cutting programs, often mandated by repeated cuts in budget appropriations. The alternative was found in standardization initiatives which originated on the product or production side.

Standardization initiatives with differing emphasis

Standardization is a goal-oriented consolidation which, it is hoped, will produce the same level of output from lower input. Standardization can extend to systems, production processes, and products – in most cases, all of them are involved. For simplicity’s sake, standardization will be used below to mean the standardization of products, processes, and structures with the objective of reducing complexity.

There are many initiatives with this aim making the rounds in the most widely diverse industries. However, not all of them have been implemented successfully in a way that can be understood. To be sure, concept and implementation are usually individual; nevertheless, the outlook and general conditions for a standardization campaign and its consequences, especially for outsourcing, off-shoring, and insourcing after the financial crisis, can be described in broad terms.

Original equipment manufacturers (OEM) have found various ways to push forward with standardization. Several standardization philosophies can be distinguished on the basis of the differences in their approach to the issue.  
Next page