HTI, which manufactures a part used in almost every computerized device—from computers to portable MP3 players to digital cameras—is a technology enabler. Consisting of two million sf of space spread across four North American facilities, housing approximately 5,200 employees, the company ships 95 percent of its product to manufacturers in Southeast Asia. In 2002, the computer industry experienced a global downturn and HTI's production numbers dropped sharply. In order to adapt to demand changes and continue growing, HTI initiated a progressive realignment of its management model with respect to capital planning, staffing, and service contracting philosophies. The initiative involved streamlining business processes, automating manufacturing systems, and strategically outsourcing support tasks such as facilities management, landscape maintenance, and food service.

"We went through a reassessment phase and decided our best strategy was to outsource non-core business processes and automate as many functions as possible so that, when the industry turned around, we would be well positioned for it," says Jack Yates, corporate director of facilities for HTI.

Since then, the computer industry has surged back. HTI has achieved record levels of output per employee and now produces more than 14 million parts per week. Thanks to improved business processes, automation, and a flexible strategic sourcing model, the company has kept pace with the rapid growth while maintaining a relatively level headcount. With these systems in place, HTI achieves a production rate of 3,300 parts-per-employee, compared to 1,235 parts-per-employee in 1998.

"We are the sole provider in Southeast Asia for some of our clients. We have to make sure that their parts are delivered on time without any problems. In order to have sustainable performance, reliable processes are essential," says Yates.

As part of the initiative, HTI streamlined its internal business processes and developed a refined system for strategically integrating key support services through a progressive out-tasking service model.

Outsourcing versus Out-tasking

Integrated outsourcing and out-tasking play significant roles in HTI's management and staffing strategy. While some jobs can be handled under traditional outsourcing models where an experienced supplier provides comprehensive service, other mission critical functions require a higher level of organizational integration.

"When you outsource to another company you get a business partner. A partner is someone who you see on a regular basis, but you don't have to see them every day" says Yates. "As long as the job gets done, we don't need to analyze their process. Once we establish a firm price, they can be left alone to handle it."

While outsourcing non-core tasks like food service and landscape maintenance makes good business sense for HTI, outsourcing more operationally integral functions like facilities management is more complicated.

"Our facilities environment is fundamentally intertwined with our manufacturing process. The control of temperature and humidity are mission critical. We didn't want to just hand those responsibilities off to someone else," says Yates.

Instead of outsourcing facilities management in the traditional sense, HTI developed an out-tasking arrangement. Under the out-tasking model, instead of handing off the job to an outside vendor, HTI staff and managers who are already conducting the work become employees of the outsource provider. This model gives HTI the staffing flexibility it needs without compromising performance or modifying highly specialized procedures.

"Most out-task employees were previously HTI staff who are now employed by the contractor. It is more of a time and material relationship. They are still doing the same work and are dependent on us for direction and prioritization," says Yates.

HTI's out-task employees are incorporated into the company's management structure and planning processes, and their performance has a direct impact on HTI's management bonus plan. In addition to the internal productivity measurements of their respective agencies, they are also given quarterly performance reviews by HTI.

Cultural Compatibility

Yates explains that whenever there is an outsource company operating in your building, it's important to merge values with that company and establish priorities.

"With outsourcing, probably the biggest issue was bridging the cultural differences between the outsource company and HTI. We make very small parts and measure deficiencies in parts per million. We follow a very precise process. We expect the people who work with us to have that same level of performance and support our company's philosophy," says Yates.

Due to cultural differences, HTI's initial outsourcing experiences proved challenging.

"We wanted the provider to do what we did, which we thought was really easy, but conflict came where the contract didn't reflect what we had thought to be within the scope of their work. Every day there was a comment to the effect that something was not in the contract and should be a project or an Additional Work Request (AWR). It got to be that we didn't even want to hear the word contract at all, Instead of focusing on what needed to be done, we spent more time talking about the contract," he says.

Situations like this drove HTI to develop unique staffing strategies like out-tasking.

"The primary advantage of out-tasking is that it gives us a high degree of flexibility. We define the scope and priority of the work; they perform it."

One key difference in this contracting philosophy is that penalties for not performing were removed.

"Tracking and enforcing contract penalties was really a burden on both companies. Essentially, we have a contractual agreement which states that as long as they are providing a quality service at a fair price, we are going to stay together," says Yates.

Streamlining Success

Among other processes that HTI has implemented as part of the initiative is a stripped down procedure called ESSA: Eliminate, Simplify, Systematize, and Automate.

"We are always driving the idea of system simplification. Before automating something we go through and make sure it is exactly what we need. Any added steps or features we don't need are eliminated—this is always the first step," says Yates.

After the elimination step is complete the process is simplified. Like functions are combined and process flows are reviewed to identify waste, and then systematized so that they are repeatable on an ongoing basis.

"Only after something has gone through these steps will we automate it," he says.

The ESSA process of combining and systematizing functions is credited with generating considerable ongoing efficiency-related savings for the company.

Learning Lessons

Hutchinson Technology has learned some important lessons in relation to outsourced staffing strategies. Among these is that out-tasking, while flexible and efficient, requires planning in regards to transferring employee HR packages like medical benefits, 401k plans, and accrued vacation time from HTI to the outsource vendor.

"When you transfer employees, there can be an initial feeling of abandonment. The first time we did this, we didn't entirely anticipate the problems that came up. When we initiated our second out-tasking initiative, it was easier because we resolved the issues over benefits and 401k packages early on. It's important to partner strongly with the out-task provider so transferred employees don't feel abandoned," says Yates.

Yates also emphasizes the need to agree on what productivity measurements will be used and the frequency of reviews.

HTI measures productivity and reliability with a range of metrics determined in collaboration with the provider during breakout sessions. Quarterly business reviews rate performance based on designated quantifiable activities such as preventive maintenance, predictive maintenance, and response to work orders.

"Anything that can be measured can be improved, and everything can be measured. Success isn't about being lucky, it's about analyzing your work processes and making good decisions to continuously improve them," he says.

By Johnathon Allen