Insourcing as a Stratagy for Cost Reduction: a Methodology to Identifiy and Mensurate the Supporting Decition Factors

Abstract

The 2008, market crisis made the national siderurgy industry reconsider its cost structure in order to maintain its competitiveness. Among the adopted strategies, insourcing was used in order to reduce costs and improve its productive capacity from its people and equipments resulting from declining sales. This research has been developed within this context and has as its objective to quantify the results of this choice. In order to achieve this objective, an insourcing case study of mechanical maintenance at ArcelorMittal Tubarão (AMT) was used. Among the main advantages of insourcing at AMT are: the reduction of 24, 41% in maintenance services costs; a reduction in the level of rework and the level of lost time injuries (LTI); increased productivity and the index for available time fulfillment on shutdown. The factors that most contributed for the services insourcing are: collective bargaining agreements of the contractors higher than those of contracting and the incidence of profit, management fees (rates administration) and taxes on the cost of labor and benefits to employees. This research also concludes that if the service prices of third parties were only adjusted based upon the inflation index (INPC) over the last ten years, the insourcing of services, if viewed from the costs standpoint, would have been unfeasible.

Keywords

• Insourcing
• Outsourcing
• Maintenance
• Reducing Costs