Advantages of Outsourcing You Might Not have Thought of
In today’s world, ‘outsourcing’ has become a buzzword and “go to” for many companies. To some, it might seem like you’re just passing the buck or shrugging your work off onto someone else, sitting there in your high chair and claiming services you don’t actually offer or taking credit for work you didn’t do yourself. When you look at it in that way it can leave an even more sour taste in your mouth than the sauce you had with your lunch.
However, there are many levels and dynamics involved in outsourcing that you might not be aware of, from higher quality work to an increased productivity rate in your output. But before we go into the advantages of outsourcing, let’s talk about what outsourcing actually is.
Outsourcing Vs Offshoring
Outsourcing is a method used by companies to ‘source’ different services or skills they are not able to offer themselves. This is especially beneficial in cases of work overload, a tight time schedule or where a specific output is needed, for example: Just because you are a local printing company, doesn’t necessarily mean you are able to provide high-quality 3D printing and rendering services. And on the flip side, just because you don’t offer those services, doesn’t mean you should just go ahead and lose a potential client. In the here and now, such drastic measures are no longer needed.
An entire industry born from examples exactly like this one, different companies working together in a mass market style to help each other, help you get what you need, call them a middle man, outsourcing companies exist for this reason.
A printing company might not be able to give you the exact output you need, but they do know someone who can, handing over the project is a simple step. It’s faster and more direct, and best of all everyone gets what they need without it costing you an arm or a leg. This system has become so successful that more industries have begun to use it.
Finance companies outsource to debt collecting companies, or highly skilled accountants, property agents and companies that offer data entry services. Retail companies outsource to numerous manufacturers and suppliers. Corporations outsource to advertising and marketing specialists, finance specialists even lawyers. Truly it has become more and more prevalent, almost a one pot mix of everyone linking to everyone to reach goals not obtainable alone.
The activity of this can be seen in the below graph:
Activity Statistics in Outsourcing
In contrast to outsourcing, offshoring is a method used where you have a product produced or a task done in another country. In this example, companies find a vendor in a country usually with a lower economic strength, for example, America handing tasks to people in South Africa. Because the economy is weaker it inevitably ends up costing the host company less, and the vendor also makes a profit due to exchange rates, this does have the potential to link people with higher expertise together at an affordable rate.
However, unlike Outsourcing, a slight cost reduction in the creation or potentially higher quality, availability of resources, access to technology, etc., are some of the benefits found. because of the fact that you are working with another country, time can and does become a major factor. Everything slows down and it can take much longer for your goods to reach you, hefty transportation costs come into play, customs, boarders, paperwork and legalities all become elements that directly affect your end goal. Not to mention that in some cases the end product is not as high a quality as originally promised.
In studies done comparing the two options, the benefits of Outsourcing can, and does outweigh Offshoring as seen in the below illustration:
Benefits of Outsourcing
For many companies, it all comes down to risk. When you are already pouring your lifeblood into the name of your company, spending years building a solid reputation, it simply doesn’t pay to take blind risks. Every business owner needs to know the Ins and Outs of what is happening, where it’s coming from and how much it will cost. After all, how can you keep your word if you are not sure your supplier will do the same. By choosing outsourcing you can be certain of very specific facts:
- Firstly- You know where your goods are coming from exactly- improved subject knowledge.
- By having that certainty, your decision making will be improved.
- Reduced overall costs: Outsourcing transforms fixed costs into variable costs; call it the in-crowd sales pact outsider companies do not get access to. This can release capital for investment elsewhere in your business and allows you to prevent large expenditure in the early stages of your business.
- Remove redundancy in document processing; this is due to transportation document processing that is carried out by specially trained staff who understand a variety of unstructured, semi-structured and non-standard forms often encountered in freight shipping. Most transportation document processing teams ensure documents are handled accurately and problems are resolved quickly.
- Outsourcing creates an opportunity for innovation. Suddenly business is no longer restrained or held down by capabilities or glass ceilings. You are able to expand and offer more than before.
The list goes on, but as they say: “a picture is worth a thousand words” as shown below:
Our recent study, looking at the two sourcing types, revealed that there has been a major reduction in offshoring in comparison to Outsourcing because of reasons like the ones mentioned above:
How to Get Best Out of Outsourcing
It seems the most common question one could ask is, by outsourcing your business which practices you can use to gain the most amount of benefits? To answer this, you simply need to look at how your business runs while also keeping the following in mind:
- Don’t Choose a Vendor Based on The Offered Price – Though it might be tempting in most cases, never select a vendor based on how much they charge. Those who are experienced in outsourcing always recommend discarding the highest-priced and lowest-priced bids for risk of cost inflation or low-quality services.
- Clearly Define the Scope and Expectations of Your Project – Any successful outsourced project always starts with a clear statement of what you are hoping to achieve, this can only be accomplished by defining your project requirements up front. If this is done correctly, vendors are able to properly quote you for the required services.
- Review Samples of Previous Projects – Take the time to examine the vendor’s previous work and make sure that their previous work meets the requirements, quality, and style you need.
- Start Small – When working with a service provider for the first time, start with a project that is not too big and complicated. This will give you a better idea of the provider’s style and capabilities moving forward.
Examples of How Organizations Have Utilized Outsourcing To their Benefit
A very well-known example of this would have to be the partnership between Apple and the Taiwanese manufacturing firm Foxconn. In creating the iPhone, Foxconn not only handled the production and meet required deadlines but also played a crucial role in realizing Apple’s futuristic vision, by outsourcing their project to this contract manufacturer they were also able to seamlessly combine aluminum parts with frictional heat, a revolutionary technique in the technical industry. They accomplished this technique called anodization by processing the surface of the metal. It is not an exaggeration to say the success of the iPhone has greatly been affected by their partnership with Foxconn, and Foxconn’s has greatly grown thanks to the creation of the iPhone.
Another noteworthy example would have to be Nike. Thanks to outsourcing that they have become the billion-dollar industry that we know today. To date, they have outsourced shoe designing and manufacturing projects to countries all over the world including China, Indonesia, Vietnam, Taiwan, South Korea, and the Philippines. This strategy has created a massive amount of jobs and also given Nike the impressive variety they have become known for. After all your back lawn isn’t the same terrain like the mountains in China and so on. It’s no wonder these businesses are now some of the world’s most renowned corporations, they each incorporated outsourcing into the very nervous system of their business to ensure a strong present and a productive, unhindered future.
In conclusion, outsourcing has become an important trend, yes there are some cons to outsourcing as with all things. But we believe that it has helped us grow and compete in a healthier way. It has increased globalization and created an opportunity where everyone gains in expanding markets, experience and costs. And most of all it can give even an average company a competitive advantage if used right.