First Time Outsourcing – What to Consider

Before you do anything else, you need to understand exactly what outsourcing is and why you need it.  Outsourcing can benefit companies of all sizes, but particularly organisations making the transition from start up to fully fledged business. When it’s done well outsourcing owners can save your business money and support growth, but it’s essentially that business owners understand the challenges and potential pit falls in order to get the most from outsourcing

Outsourcing can bring huge benefits to a company, but only when it is done right. The common misconception is that it’s all about handing over control to a stranger, but it doesn’t have to be this way. Instead it should be viewed as a strategic, cost-effective service provided by a close partner that gives your business more flexibility and the room to grow.

When should you outsource?

Understandably, some entrepreneurs will be nervous about entrusting part of their business to an external company. There are a number of reasons for this, from trust and loss of control, to quality assurance or even the perceived vulnerability of relying on a supplier. But discussing these concerns openly with potential suppliers will often be enough to reassure you. A prospective outsourcer’s costing process and service presentation should provide reassurance and help you understand how and what parts of the process can and/or should be outsourced.

Key considerations

You need to have assurances in place to make sure any issues in the repacking process aren’t transferred to the end consumer. The warehousing system between the client and supplier have to be completely integrated in order to maintain the integrity of the product – for recall purposes, both parties need to be able to identify, monitor and control production batches.

When selecting an outsource partner, it’s not just about the supplier’s ability to do the job but also its ability to manage an escalation in increased volume; it’s important that the supplier has the ability to increase capacity if required. I would urge you to go and see the operation and check for yourself.

Benefits

Undoubtedly one of the single biggest benefits of outsourcing is being able to continue with production at full speed.
Another major benefit of outsourcing is managing resources through the peaks and troughs. Most manufacturers don’t have the luxury of having abundant capacity in its warehouses, so the ability to change inventory with demand and buy by the hour or per unit is a massive advantage when it comes to controlling costs. You’re also likely to get an optimum cost for doing the job, which should ultimately provide cost savings. Finally, above all else, it allows the organisation that is outsourcing to concentrate on its core services.

Potential pitfalls of outsourcing

There are of course potential cons to outsourcing. As a potential outsourcer you’re going to have to work extremely hard to put together the most accurate invitation to tender. If you fail at that, you will fail all the way through. When you’re looking for a potential outsource partner you need to know what you’re buying. You have to know exactly what you need, as the pitfalls of ambiguity on invitations to tender are the prime reason for partnerships failing and indeed, are the biggest complaint amongst the outsourcing community.

The secret of successful partnerships

To develop closer relationships and work out mutually beneficial strategies, business owners need to openly discuss their plans for the future with suppliers, under a non-disclosure agreement if necessary. Ultimately if the outsourcing is very successful it may end up with the business having enough critical mass to take the operation back in house. This is not something to be afraid of talking about, as suppliers need to be well aware of their part in the development process and will often be happy to work on this basis.

Business owners and suppliers need to work harder at forging stronger relationship, as it’s only when close working partnerships are developed that the benefits of outsourcing are truly realised. Regular contact and transparency throughout the supply chain is essential, as any small error could potentially affect thousands of products. As such it is important that your outsourcing partner has the software in place to enable you to do this.  For example, implement a real-time reporting system to demonstrate capability for clients to keep 100% up to date with campaign activity.

If nothing else, I’d say businesses shouldn’t be scared of outsourcing. There are suppliers out there that can provide great tactical solutions and could be just the right catalyst to take your business to the next level.

 

Source: Sourcing Focus
 
 

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