Bulldozer #8 (Insourcing): UPS's Example of Repairing Laptops for Toshiba – How to Explain the Seemingly Contradictory Concept of "Insourcing"?

Hey, this question is very interesting! The term "Insourcing" can indeed be a bit tricky, especially in the context of UPS repairing Toshiba laptops—your first thought might be, "Isn't this just outsourcing?" Don’t worry, let me walk you through it. I’ll explain it clearly using plain language.

First, let's draw an analogy.

Imagine there's a highly capable property management company in your neighborhood.

Initially, this company only collected fees, cleaned the grounds, and manned the security booth.
Later, residents realized that calling separate handymen for blown light bulbs or clogged pipes was too much hassle. Many turned to the property management company, asking if they could handle it.
The manager thought to himself—this is a business opportunity! So instead of just connecting you with outside plumbers or electricians, he directly set up an "In-House Maintenance Service." He hired professional technicians, bought a full set of tools. From then on, your property company took care of all repairs—quickly and well—because the techs were always around the complex, handling jobs along their route.

Now, looking at this process:

From your perspective (the homeowner), you outsourced the "appliance repair" task to the property company.
But for the property management company, it brought a completely new business function—"providing repair services for residents"—inside its own organization, turning it into a core service. It expanded its scope of business "inward." This is “insourcing”.

Now back to the UPS and Toshiba example

Replace the property company with UPS and yourself with Toshiba—it's exactly the same.

1. From Toshiba's perspective: This is "outsourcing"

This is easy to understand. What is Toshiba's core business? It’s designing, developing, producing, and selling laptops. As for repairing broken computers, that’s a troublesome after-sales process requiring repair centers, hired engineers, spare parts inventory management, handling logistics... This consumes enormous time, effort, and money.

So Toshiba thought: "Why should I struggle with this myself? Why not package the entire 'repair' process and hand it off to a specialized company?"

Therefore, Toshiba outsourced its laptop repair and logistics services to UPS. For Toshiba, this is absolutely outsourcing.

2. From UPS's perspective: This is "insourcing"

This is the key point and the source of the term "insourcing."

What was UPS's core business originally? Logistics—driving brown trucks to deliver packages worldwide. But UPS's leadership observed their global network’s immense reach and efficiency. They weren't just "moving stuff;" they were managing the world's most complex "supply chains."

They thought: "We help major clients (like Toshiba) ship products and parts every day. What if, once a package is in our hands, instead of just transporting it to the next hop, we repair it right in our warehouse before shipping it back to the customer? Wouldn't that be so much better?"

So that’s exactly what UPS did. They built a massive "Repair Center" next to their global logistics hub in Louisville.

They hired specialized computer repair engineers.
They managed Toshiba's inventory of spare parts.
When your Toshiba laptop broke, you contacted "Toshiba," but a UPS truck came to pick it up.
The laptop went to the UPS Repair Center, where UPS employees fixed it.
Once repaired, it was shipped directly back to you via UPS planes and trucks.

Do you see? UPS absorbed, integrated, and established the entire business function of "repairing Toshiba laptops" inside its own company. It stopped being just a pure logistics company; it expanded “inward,” becoming a "logistics + technical repair" service provider.

From UPS's perspective, it took a function that was originally an internal task of the client (Toshiba) and made it its own core, internal business operation. This is "insourcing."

To summarize and clarify completely

This seemingly contradictory concept all comes down to perspective:

Outsourcing: "I" give my own work to someone else to do.
- (Toshiba gave the repair work to UPS)
Insourcing: "Someone else" takes "my" work and makes it into "their own" core business.
- (UPS made the repair business into a new internal department and core capability within its own company)

When Thomas Friedman introduced this concept in The World is Flat, he meant to show us how corporate collaboration has evolved in the age of globalization. It’s no longer a case of "you do your thing, I do mine." It’s more like what UPS did: deeply integrating into a client's processes, turning the client's "non-core business processes" into the service provider's "core business," thereby creating massive efficiency and value. This is a perfect example of what Friedman meant by "the world is flat."