Insourcing refers to the practice of assigning work to an individual or department within an organization instead of contracting it out to a third party. That is, the company uses its own resources to perform the work rather than those provided by another entity.
Insourcing is a process where work that would otherwise be outsourced is carried out internally.
Insourcing may be the preferred option for several reasons:
- Increased responsiveness. In today’s dynamic global market, businesses must be more agile than ever. Outsourcing work is normally a slower process which can hinder a company’s responsiveness.
- Knowledge and social capital. In the most successful organizations, social capital fosters collaboration between ambitious employees who are motivated to reach their objectives. Insourcing keeps this knowledge in-house where it can be utilized with the greatest impact.
- Lack of control. In some cases, poor quality work is produced by the outsourcing company which results in significant financial losses. Insourcing can be more desirable since the company has more control over decision-making and the final product.
How does insourcing work?
Before insourcing can take place, the company must first identify a need, project, or area where it is otherwise lacking that could benefit from professional guidance.
The company may then transfer one or more specialists to an existing team or create a new team subject to resource constraints.
Insourced staff may work for a predetermined period or until certain KPIs or objectives have been met.
Some may establish new company-wide processes and procedures and/or remain in their new roles indefinitely.
Let’s conclude by describing two insourcing examples that will provide clarity on the practice.
Breakfast cereal company
Consider a British breakfast cereal company that wants to expand its marketing and promotional activities to France and Spain.
Since its ads have only been run in English, the cereal maker requires French and Spanish speakers.
Many companies who have found themselves in a similar position have contracted the creation of the ads to a third party in the relevant country.
The cereal company, however, uses insourcing to recruit native French and Spanish speakers who then build their own internal teams.
In addition to translating existing promotional materials, the new staff play a pivotal role in the creation of culturally-sensitive and relevant ads for French and Spanish audiences.
Agricultural machinery company
In the next example, we have a company that designs and manufactures heavy machinery for agricultural purposes such as combine harvesters, tractors, and balers.
In preparation for the release of a new harvester, the company recruits its in-house engineers to write the owner’s manual instead of looking for assistance externally.
Sensing that it would be more cost-effective than outsourcing, the company pays for its engineers to enroll in a technical writing course.
With more internal control over the process, the manuals are more likely to be of a sufficient standard.
- Insourcing is a process where work that would otherwise be outsourced is carried out internally. Benefits include increased responsiveness, improved knowledge and social capital, and more control over the final product.
- Before insourcing can take place, the company must first identify a need, project, or area where it is otherwise lacking that could benefit from professional guidance.
- A cereal company can use insourcing to hire French and Native speakers as part of an international expansion effort. A manufacturer of heavy machinery can also use it to avoid having to hire external technical writers.
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