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The offshore outsourcing looks more and more as key to small businesses survival. Today businesses face rising costs, limited sales, and lack of resources to develop and launch new products. Their specific industry entry or even sustaining level barriers are higher and higher while competition is ruthless, and banks loans or assets are insufficient. They must find new, more innovative ways to overcome disaster and reverse fate. The offshore outsourcing is one of such new and innovative way.
Wise and successful offshore outsourcing provides many short or long-term benefits that businesses must take advantage.
Number ONE listed benefit of outsourcing is the Cost Savings. Offshore outsourcing converts the manufacturing Variable Costs into Fix Costs and then start reducing them. In the process, the Minimum Order Quantity (corresponding to the financial Break Even) decreases to lower values and releases capital to invest elsewhere in the business (like R&D, promotions, advertising, etc). This new gain capital not only boosts business productivity (more output with less input) but also makes business more attractive to investors while dramatically increasing the Cash flow.
Scalability is another advantage because the offshore-outsourced company manages production fluctuations due to forecast mismatches.
Tax benefit could be a great advantage to counter high local corporate taxes when moving manufacturing operations within other countries.
Reducing labor costs is yet another benefit due to cutting the costs associated with hiring and training.
Improving customer satisfaction (quality, costs, delivery) is a huge step toward boosting Sales. In a successful offshore outsourcing, Quality increases, Prices decrease, and Delivery is “In Time”.
Operational expertise becomes advantageous because the access to better operational practices that would be difficult and costly to develop “in-house”
Development expertise is a massive benefit through access to offshore contractor’s larger talent pool of knowledge, skill and engineering.
Reduce time to market is one of other competitive advantages when a strong customer/supplier relationship moves new products offshore and speeds up the development process due to supplier additional capabilities.
Risk management is another advantage since manufacturing liabilities fall, under local or international laws, on the outsourced company.
The time zone is another competitive advantage due to the world time difference. Customer/supplier tandem can work (without any overtime) sixteen daily hours when provider continues to implement solutions, design or production in his own daytime, while customer is after hours.
In countries like U.S., U.K., Norway and Australia, small businesses took already advantage of these benefits and move toward offshore outsourcing. For them, outsourcing is not a way to replace their existing human resource since that resource is the most valuable of all the assets, but to simply free it from some of the business functions and redeploy in more vital ones. They understood that, when not abused, offshore outsourcing is an innovative way to cope with actual economic conditions.
The released human resources due to offshore outsourcing is now distributed inside the organization for critical tasks like “on-the-job” or educational (technical) training, R&D, new projects, new production lines, business promotions, marketing, etc. The outsourcing becomes nowadays a catalyst for change that release capacity for innovations. Customer human resource team up with offshore supplier experts for the benefit of both their organizations.
Historically speaking, the world economy recovers from each crisis through the effort of small businesses (small caps) and maybe offshore outsourcing is the globalization “answer” to prevail actual turmoil.