Care for a business turnaround this year? With all the goings-on in the industry, you might want to level the playing field with the advent of outsourcing operations. Find out why, how and what you are getting into by knowing more about this strategic option.
Why outsource your activities
Perhaps you have been wondering why companies in the United States are still thriving despite the trade deficit. Oh well, most of their production activities are being outsourced overseas to lower costs. While it might have hit the American labor force, it brought job opportunities to other countries with lesser expenses on labor. The thing is, there are places in the world that can produce the same items and deliver the same services at a lower cost due to geographical differences in cost of living, product pricing and state regulations. And, these countries welcome investment from companies interested to help out the local economy by bringing in work for its people.
When you outsource operations, you also get to shift the burden of doing general and administrative work pertaining to the unit you intend to relocate overseas. That would mean relieving the management of the administration of hundreds of workers in case of outsourced production. You will not have to worry about recruitment whenever employee turnover is high or labor relations whenever operators get caught up in misunderstandings from time to time. Someone will be handling all this for you the moment you ink a deal to outsource operations thereby giving you a free hand to explore some other possibilities.
Once you let go of one of your operations, you will have the chance to focus on something bigger such as expansion by means of forward integration. There is an array of options like expanding your distribution chain with the money spared by your outsourcing decision. You can also consider putting your extra cash on research and development to optimize efforts on product innovation. Nonetheless, feel free to bolster your marketing strategies to boost sales and increase your chances on profitability. All you have to do is go for the best alternative that would drive you closer to your priorities as of the moment.
How to outsource your activities
Chances are, the first decision you will have to make is to pick which operation will be the subject of outsourcing. Some would opt for customer support and technical services to be handled by specialists, others would rather choose the tedious production process left to skilled workers, and the rest would go for both. The choice is yours upon cautious deliberation of costs and benefits of doing so with the help of internal and external consultants that can provide you with sufficient perspective on these matters. It would help you keep your options open until you have gone through a comprehensive assessment of circumstances.
Outsourcing might be an easy decision on the backdrop of cost-saving benefits for the company but going through the process takes endurance. Imagine you will have to cut off a portion of your organizational structure to be able to turn over a new leaf. This would involve either laying off personnel or transferring them to another department which can be tough as you constrict domestic network to diversify overseas. No matter how you decide, you may want to remind yourself that you are only doing the best you can for the future of the company; and besides, you can always write brilliant recommendation letters for your employees.
Next thing for you to do is benchmarking of foreign companies that offer outsourcing business operations. By all means, you can make an appointment with those who have gone before you to know which among your prospective partners seriously mean business. You can likewise look into the track record of these enterprises to be able to gauge their credibility in handing over quality deliverables on time. Although you would reasonably prefer the veterans in the industry, you still might want to give chances to newbies with whom you can haggle for better prices.
What to consider when you outsource activities
Outsourcing is more than about relocating your business activities since you will have to commission another entity operating locally to do business operations for you. There will be risks along the negotiation considering that you will have to trust the word of another to be able to appease yourself. More than anything else, you need not put all your eggs in one basket so you may spread the risks either by starting small deals with a single one or commissioning several ones for a big project. You are good to go as long as you were able to align your options with your current targets.
Take your worries somewhere else by getting the deal right with a sound contract that ensures all requirements would be fulfilled at the particular period agreed upon. Take time to sit with your legal team to discuss your expectations from the other party, and at the same time, understand the other party’s expectations from you. This is a two-way street so you will have to honor your end of the bargain to be able to earn the same from the other. Be that as it may, you have to make sure that you get to protect your interests by putting in exclusivity, non-disclosure, non-compete and other relevant clauses.
As an outsourcing client, you need to build your reputation from here on knowing that you will be in it for the long haul. It would be great to establish a great professional relationship with your outsourcing partner by welcoming the firm in your inner circle. A simple way to do so is by keeping in touch for purposes not only of reporting progress but also socializing casually. Making a friend out of your business partner would send a good impression in the industry after all.
Now, you are in the best position to make a difference for your business after having gone through the why, how and what in the realm of outsourcing.