“Because we are different, our challenge is to create a vision of what we do in a prospective customer’s mind,” explains Mackie.“A potential customer could be a major manufacturer with production offshore that brings some product back to the U.S. for assembly, packaging and distribution. Each order needs to be manually assembled, then packed and shipped. Insource operates in the clients’ facilities, and our presence helps manufacturers realize significant cost savings, quality improvements, and productivity increases.” Mackie maintains that one of the few areas left for companies to make improvements in is their manual, labor-intensive processes. Insource focuses exclusively on these processes, incorporating engineering services, operational know-how, and superior labor management techniques. Insource employs more than 1,000 permanent, full-time associates – 15 in the corporate office – with the balance working in manufacturing and distribution operations throughout the Southeast.
“Today, many companies find themselves in an environment with virtually no ability to raise prices, yet as we all know, costs continue to go up,” says Mackie. “As we focus on the manual labor component of our clients’ cost structure, we see medical insurance, workers’ compensation, retirement benefits, and other rising costs just killing them. The burden rate for most companies ranges from 30 to 60 percent.” He adds that in some cases, in order to reduce labor costs, companies turn to temporary workers, and while it is true a company can reduce costs with this approach, it often adds as many problems as it solves.
“Temporary labor is becoming a commodity service, where companies still have to train and manage the temps, and high turnover is inherent in this type of arrangement,” says Mackie. “Too often, the expected cost savings ends up being diluted by increased training costs, more errors, and degradation in productivity. What’s worse, these arrangements typically have little accountability and absolutely no guarantee of performance. Customers tell us it is extremely difficult for them to meet their internal performance goals using temps.”
Forging accountable partnerships – a total solution
“In today’s environment, many companies have hit the wall in their efforts to reduce costs, even by introducing commodity contract labor. That’s key to us,” says Kevin Clark, Insource vice president. “It’s how we differentiate ourselves. What makes our business model so unique is that our goals and incentives, and those of our customers, are one and the same. This alignment, with everyone working together toward common goals, is how we achieve shared success with our clients. And most importantly, we sign up for full accountability for our performance. Just as our clients are accountable to their internal goals, so are we accountable to those same goals. It is this partnership around common goals that excites our clients the most.”
Insource has seven highly accomplished engineers (five MBAs) on staff, ready to be dispatched to a client’s site. It’s their job to learn the processes underway at a site, identify and recommend improvements, and develop a plan for implementing those improvements. That’s the engineering assessment made using the principles and methodologies of Lean and Six Sigma. In one instance, Insource engineers spent 1,200 hours helping a client improve quality by reducing manual picking errors in a distribution operation. Using Six Sigma’s DMAIC (Define, Measure, Analyze, Improve, Control) approach, Insource engineers work to optimize manual processes and unlock the potential for new levels of performance.
From software to contract staffing CEO
Mackie is a UNC Chapel Hill graduate who, after spending two decades in the software industry which included operating his own software firm, sold his business and worked in the non-profit arena in Charlotte. In 2000, he was invited to join the Wakefield Group, a venture capital firm that invests in growth companies with a focus on information technology, health care and business services. Mackie came on board as both a venture partner and Entrepreneur in Residence, bringing his experience in software and business processes to the table.
“Wakefield gave me a home,” says Mackie. “They allowed me to work in tandem with them on any deal I wanted to. I tackled due diligence assignments, sat on boards, and on one or two occasions was a semi-active chairman mentoring and coaching CEOs. It gave me a platform from which to look for opportunities, and hopefully I gave Wakefield a different perspective on companies with an eye for processes.” For example, in 2002, one of Wakefield’s portfolio companies expressed a need for an interim chairman and CEO. Mackie took that assignment and made it his mission to get the company back on track and hire a world class CEO from that particular industry for the company, which he did. By the end of 2002, Insource was on Mackie’s and Wakefield’s radar. According to Mackie, with closer examination, the possibilities of the unique business model became apparent because it was a hybrid of engineering services with an internally outsourced labor component that offered its customers an integrated total solution with guaranteed results.
“The company had a prestigious list of customers and did a great job for them, but the company had evolved and begun to outgrow itself due to its success,” says Mackie. “It had a great value proposition and that’s what we liked. We saw tremendous potential in the concept and the timing at it relates to today’s business environment. After close to six months of due diligence, we completed the acquisition in May of 2003.”
2003: The year of transition
During the first six months of operation, Mackie built out the company’s infrastructure, including installing new information technology systems, upgrading the company’s payroll and financial systems, and positioning the company for growth and scalability. Mackie says the growth potential is so great that his goal is to take the company’s employee count from 1,000 to 10,000 during his tenure. Mackie des-cribed 2003 as the “year of transition” for Insource. “We’ve concentrated on repositioning the company by truly defining our value proposition and differentiating ourselves in the marketplace. We are building our brand around our name, which truly represents what we do, literally, insource contracting services.”
Mackie also focused on stabilizing the customer base, which includes a large number of Fortune 500 companies, including distribution centers of the intimate apparel division of Sara Lee; tool manufacturer and distributor Stanley Works in Kannapolis; the Burnes Group, a division of Newell Rubbermaid, with its distribution center in Statesville; and Coca-Cola Bottling Company here in Charlotte. Burnes Group distribution manager Curtis Swope has worked with Insource for four years. He says Insource removes the risk normally associated with the hiring of temporary workers.
“They offer a unique service in that they supply the engineering, production improvements, the staff and supervision of the staff,” says Swope. “And we particularly like the work ethic of the people Insource brings in. There are no people issues for us. They come in, get the job done, and do it well.” Approximately 80 Insource employees currently work at the Burnes Group packing and distribution center located in Statesville. Swope plans to increase that number to 160 during the fourth quarter of this year, leveraging the turnkey abilities Insource provides.
Who makes the best worker – who makes the best client?
Mackie says his company’s goal is to forge a strong partnership with its clients. He looks for three attributes that make a company a viable partner: A highly manual process, a process that’s repetitive and constant, and a process that can be measured. “Our goal is to reduce operating costs, enhance productivity, improve quality and provide them with total flexibility in their labor management strategy,” says Mackie. “And we guarantee our results.”
As for employees, Mackie says Insource only hires people with a strong work ethic, those who are trainable, and those who will represent the company well. He adds, “We make medical benefits available to our associates, and we create an incentive-driven environment in which high performance is recognized and rewarded. And as we continue to grow, our associates will have every opportunity to grow along with us. We are all very excited about our future.”
Mackie is an investor in Insource Contract Services along with The Wakefield Group, which is the majority investor, and Petra Capital Partners, L.L.C., a private equity firm based in Nashville, Tenn., which focuses on investing in later stage growth companies in business and healthcare services companies. Insource plans to continue expansion throughout the Southeast in the near term, and eventually become a national coast-to-coast company.