10 Factors to Consider for Outsourcing
Decisions
Growth
By Pratik H
What is an outsourcing decision?
An outsourcing decision is when a company chooses to hire external
organizations or professionals to manage specific business tasks or services,
instead of handling them internally.
This strategic decision is often driven by the desire to reduce costs, access
specialized expertise, focus on core business functions, and improve
efficiency.
It involves evaluating potential benefits and risks, considering the impact on
current operations, and carefully selecting the right outsourcing partner.
This approach can significantly affect a company's operational dynamics and
competitiveness.
Why outsourcing decisions are
important?
Outsourcing decisions are crucial for businesses because they can lead to
significant cost savings, access to specialized skills and technology, increased
efficiency, and the ability to focus on core business functions.
Making the right outsourcing decision can also provide a competitive
advantage by allowing companies to adapt quickly to market changes and
scale operations effectively.
However, it requires careful assessment of potential risks and benefits,
understanding the impact on company culture and employee morale, and
ensuring alignment with the company's overall strategic goals.
Outsourcing decision Matrix for you
to decide better
Factors
Consideration
Outsource
Keep
Ho
Cost
Is it cheaper to outsource?
Yes
N
Expertise
Do in-house teams have the required skills?
No
Y
Factors
Consideration
Outsource
Keep
Ho
Focus on
Core
Business
Does the task align with core business
activities?
No
Y
Control
Is direct control over the task crucial?
No
Y
Quality
Can the outsourced provider guarantee quality?
Yes
N
Scalabilit
y
Is there a need to scale the task quickly?
Yes
N
Risk
Managem
ent
Can risks be effectively managed externally?
Yes
N
Technolo
gy
Does the task require specialized technology?
Yes
N
What are the factors influencing
outsourcing decision?
Outsourcing is a strategic decision that can significantly impact a business's
efficiency and success. Understanding the key factors involved is crucial for
making informed decisions.
This section explores the essential considerations in the outsourcing process.
Let’s take a look at some of the factors to consider for taking outsourcing
decisions for your business.
1) Cost Savings
When you talk in pure business terms, outsourcing needs to improve your
business bottom lines through reduced operational costs. If you don’t see this
happening anywhere in the near future, chances are that you’ll end up
spending more than you end up saving.
You don’t need to be an expert analyst to figure out where you’re heading. All
you’ve to see is whether outsourcing will help you reduce a significant amount
of your capital in hiring employee and equipment. At the same time, you will
also need to maintain a balance between the quality and quantity of the
services provided by the outsourced employees/firm.
For instance, if you outsource accounting, see if doing it yourself costs more
than outsourcing.
2) Pricing
We already discussed how cost-cuttings by hiring talent in a low price tag is
one of the most common factors why companies outsource. You’ll get several
vendors offering their resources at a competitive price.
However, instead of going for the cheapest vendor, compare and find out
what are you going to get from other vendors as well.
For instance, some vendors will also offer customer support at no extra
charge, which is a great deal in itself. Just remember that although price is an
important factor, it should not be the ONLY factor that helps you zero-in on a
vendor.
3) The Resources and Technology
Technology and resources are two considerations that are essential when you
choose to outsource.
Ask the vendor about the tools and technologies they are going to use for your
project and how capable are they of handling all your outsourcing needs?
What about the resources? Are they well trained for the assignments?
Does the vendor have an office with up-to-date systems and can handle the
most rigorous of the outsourcing functions?
Answers to questions like these will lead the way to select the apt vendor who
has the best resources and updated technology for seamless handling of your
business functions.
4) The Ability To Meet Deadlines
Timeliness in outsourcing is as important as the costs. For instance, if a
vendor fails to toe the deadlines, it can lead to major bottlenecks. That alone
will nullify any cost-saving benefits that you had anticipated while hiring them.
You need to ensure that the vendor adheres to the promised quality and
timeliness. One of the ways to do this is by making all your queries
beforehand.
If you find that the vendor has little quality control measures or does not have
any backup plan should they miss a deadline, it is better not to hire them in
the first place.
5) Minimal Supervision
When you hire an outsourcing vendor to work on your business requirements,
it’s a given that they are going to take care of everything from the scratch.
There should be no room for sloppy or shoddy work and they should be able
to produce the results.
Choosing a responsible vendor who will be in charge of the projects is a musthave so that you only need to supervise them minimally and let them take it
from there.
This will give you more time to focus on your core business functionalities.
6) Limit The Liabilities
More often than not, there are certain functional areas that can build up
liabilities for a business. This eats up time and money, which can be spent
elsewhere.
You can cleverly outsource certain functions to reduce the liabilities an extent.
7) Trustworthiness
Before you sign on the dotted line, do make it a point to visit the vendor’s site.
Apart from this, also research on the internet to find more about the firm, the
infrastructure, safety practices and the team that works there.
This will help you assess the reliability of the service providers. If you have a
reference who’ve worked with a vendor in the past, you can also ask them
about the firm. This takes us to the next point.
8) Who’ll Lead The Team
You can’t just have blind faith in the outsourcing team even if you’re saving
significantly by hiring them. Find out all that you can, including the team
members who’ll be working on the projects and who’ll lead that team.
Learning these facts upfront will save you from several agonies at a later
stage. Moreover, when you know that your business functions are in able
hands, you’ll be at peace.
9) The Service Level Agreement
The SLA (Service Level Agreement) is one of the most crucial documents
when we talk about outsourcing partnerships. At the time of creating the
document, make it a point to ensure that every single detail is written clearly.
This will help you avoid you any kind of confusion or ambiguity especially
about the quality of the services you’ll be getting.
It also makes sense to hire a lawyer especially to manage your outsourcing
endeavor so that you don’t end up in any legal trouble.
10) Communication
Communication is the key whether you’re working onshore or with an offshore
team. The vendors should be able to handle your queries and promptly reply
without making you wait indefinitely.
Their communication skills need to be spot on without any space for cultural
or other communication barriers. This ensures that they have clearly
understood your requirements and can address any issue that may crop up.
10 Outsourcing Tips To Grow Your
Business Successfully.
During a downturn in the economy when the demands for products and
services touch the lowest level and cost is sky rocketing, outsourcing acts like
a savior. Majority of the companies look for cost-effective solutions to run the
business operations with effectiveness and maximizing the performance of an
organization during the period of recession.
The cost of labor can take a toll on the profits of a business. In the tough times
your definitive choice is outsourcing to increase your productivity at the same
time you will end up saving substantial cost.
When you look for an outsourcing partner, you get a grasp on the procedures
and approaches that can make your business run in a seamless manner.
For instance, establishing positive relationship with the customers requires
strategic skills that can become effective with the assistance of a genuine
outsourcing services provider.
When you outsource services to a company which is located offshore, the
target is to access better workforce that can handle your tasks with a different
approach and is identified as a turning point in business.
There are some businesses that try to do everything on their own without
realizing that it is a counter-productive step.
When you are trying to step into a phase of growth in business, it is necessary
to envisage the big picture rather than getting into the realm of trivial tasks
and taking proper steps can make all the difference.
Have A Glimpse Of These
Outsourcing Tips That Can Get You
Started In Your Business.
Creating an effective plan:
There are lot of mundane work which you need to carry out on daily basis
which takes maximum amount of time. As soon as you think of spending time
on routine non productive work, think of having a virtual assistant right away. It
is good to focus on those areas in your business which will get you maximum
growth. I
t is more like filling the gaps in business with the best tactics and focusing
areas that require attention of experts. For instance, you might want to bring a
radical change in the infrastructure or anticipate a major change in the output
or manage the operational costs to reduce the outflow of cash.
Thus, you have to create a plan for the services that you require before having
a virtual assistant right away.
Understanding the basic objective of
outsourcing :
It is not enough to outsource simply because it can help you save costs. It is
true that outsourcing is cost-effective but you have to know the exact reason
for which you require the services of an outsourcing company.
An organization might want to consider the option of outsourcing to gain a
competitive edge while another business might want to reduce the overhead
cost or generate more revenue. In short, a business must focus on the reason
and benefits of outsourcing which can have a positive impact on the business.
Identifying the reasons for which outsourcing is effective : You have to identify
and find the causes for which outsourcing can be an effective option for the
services that you need to obtain from a company that has better skills to
handle those tasks.
While a lot has been heard and said about outsourcing and its benefits, it is
much like a matchmaking company for organizations that want to obtain
services that resonate with the requirements of the business.
Make sure that the company you have hired has understood your objective
and the benefits of hiring come into effect in the real sense.
Getting quotes from different service
providers :
If you want to get the best services, you have to talk to a few outsourcing
companies to find out the service that they offer and whether they match with
your requirements.
Finding a good vendor can be a challenging task as there is a host of
companies that offer these services and you need to find one that can handle
the tasks that you want.
There are multiple companies and freelance job sites like www.upwork.com ,
www.guru.com etc. You may also want to decide on whether to outsource to
an agency vs freelancer.
Knowing the points of contact :
It is important to find out from known resources about the ways in which you
have to search for reliable outsourcing companies.
However, you can also prefer to carry out an independent research although
following a set of guidelines can provide you with the opportunity to get the
best when you are looking for outsourcing services.
Getting referrals and recommendations from those people that have availed
these services can also work in your favor.
Creating deadlines and completion of work:
When it comes to outsourcing, you have to create a set of deadlines for
completion of projects.
Although reliable service providers offer a time frame for delivering the
services, there is no dearth of companies that fail to meet the expectations of
their clients.
It is good to steer clear of such companies and associate with those
organizations that have the reputation of offering the best to the clients.
Reviewing the outsourcing contract:
As soon as you get a copy of the outsourcing contract, you have to read in
between the lines and try to get a grasp of the points that are mentioned
therein.
However, if you want better conviction in work, the best option is get the
review done by a legal expert. A professional legal counsel has the ability to
locate the discrepancies in the terms of agreement and can offer you advice
against it to avoid landing in a pile of mess later.
Unless you read the document of agreement carefully, you might just miss out
on some of the most important points that are essential before you get started
with outsourcing services.
Hiring a legal counsel is good to get clarifications about the points that have
been mentioned in the contract and creates an avenue for you to ask
questions even when there is a slightest speck of suspicion.
Communication and review of work:
Many of you might just think that hiring an outsourcing company can produce
miraculous results although you have to review the flip side at first.
When you avail the services of an outsourcing company, it is necessary to
review the progress of work regularly.
Communicating with the outsourcing company is essential to know where you
stand or whether the benefits have started showing for which you have
considered availing services from the company.
Taking informed decisions:
It is good not to base your decisions on the cost-effectiveness of the services.
When you hire an outsourcing company, it is necessary to find out whether
you can get a balance of quality work and affordable services.
In short, you have to find out whether the services that you intend to hire will
offer value to your business and provide you with an opportunity to outbid your
competitors.
For this, you have to stay away from those service providers that quote
extremely low prices which either implies that the company has not
understood the nature of the work that they need to deliver or do not have the
know how to start processing the ideas.
Transparent ideas and work process:
While hiring an outsourcing company, do not hesitate to ask questions to the
service providers that can be related to any aspect of outsourcing or specific
queries about the project that you intend to assign to the company.
In addition to this, you have to be clear about the hours of working when you
hire a company that belongs to a different time zone.
For some projects, the time zone of the outsourcing company can extend the
working hours of your business leading to completion of projects ahead of
time.
Things To Remember
Even if you have a manual for the working process, you can try to find out
whether your virtual assistant can provide effective services in real time.
The best thing is to begin with a small project when you are hiring the services
of an outsourcing partner for the first time that will allow you to find out the
style of work that the company follows and the ability of the workforce to
complete the task within the desired time frame.
The next thing that you have to keep in mind is that hiring the services of an
outsourcing company which is conversant with the recent tools and
technologies that are implemented in this field makes sense.
After all, you will never want to stay behind your competitors in a bid to hire
cost-effective services from your outsourcing partner.
Reviewing the benefits of outsourcing will not help you much rather you have
to make serious efforts to understand what outsourcing is all about and
whether your business will benefit from the services or not.
Furthermore, you can communicate with the outsourcing company and make
time for meetings that can be conducted on Skype at least for the first few
months.
It is important for the outsourcing company to know that you are aware of the
services and the level of quality that a reliable company offers to the clients
and expect to get the best from them.
For small businesses the risks of outsourcing has to be studied at first when
the work is delegated to another company. Therefore, justifying the credibility
of the service provider is necessary to get services in the hour of need.
Setting a realistic budget is also important when you hire the services from a
company which is located offshore as the time frame is likely to extend
beyond the schedule.
Terminating the contract at the beginning can save you time and money rather
than finding out later that the service provider has not delivered the quality of
work that would have benefited your business.
Conclusion
Making a well-informed outsourcing decision requires a thorough evaluation of
these factors.
By carefully considering each aspect, businesses can leverage outsourcing to
enhance efficiency, access expertise, and stay competitive in their industry.
To read more outsourcing articles follow us.
GLOBAL SUPPLY CHAIN
MANAGEMENT
WHAT IS GLOBAL SUPPLY CHAIN
MANAGEMENT?
Global Supply Chain Management (GSCM) is the science of planning how the
distribution of goods and services will make it from manufacturer to consumer.
Global supply chain management is one of the most important disciplines in
21st century business.
As the term implies, the supply chain is a series of interlinked functions,
companies and individuals. It starts with those who produce and supply raw
materials or components to manufacturers, continues with the logistics firms
that move finished goods to warehouses and distribution centers, and
concludes with the hand-off to wholesalers and retailers.
For many companies, success is dependent on effective management
of global supply chains.
WHY IS GLOBAL SUPPLY CHAIN MANAGEMENT
SO SIGNIFICANT?
Modern life depends on the rapid, efficient, and safe movement of a high
volume of materials, components and finished products around the world.
According to the World Trade Organization, world trade was about $16 trillion
in 2016. Supply chains can only function if a series of interconnected systems
work in harmony: shipping and transportation, information and management,
and security and construction. Within these systems, there is little room for
error. If the supply of cocoa from Guinea is disrupted, a factory in
Pennsylvania can’t produce chocolate bars. If a single supplier of paint in
Japan is unable to ship goods for a week, car production in Michigan may
cease temporarily.
HOW DO PEOPLE GAIN EXPERTISE IN GLOBAL
SUPPLY CHAIN MANAGEMENT?
Many universities and institutions of higher education offer degrees and
training in global supply chain management. The topic is popular in business
and engineering departments. Global supply chain management professionals
hold important positions at the most prestigious corporations. A range of
companies in industries such as transport, shipping, logistic and software
make-up the global supply chain.
WHAT ATTRIBUTES MAKES COMPANIES GOOD
PARTNERS FOR GLOBAL SUPPLY CHAIN
MANAGEMENT?
Companies that operate on a global scale while possessing deep knowledge
of local markets and recognizing the importance and value of location make
excellent global supply chain partners. Being able to amass and leverage data
and information technology is another important attribute.
Managing
International
Distribution
Channels:
Strategies and
Challenges
January 5, 2024
Managing international distribution
channels requires strategic planning,
effective execution, and continuous
optimization to achieve success in global
markets. By selecting the right
distribution channels, building strong
channel partner relationships, and
implementing robust logistics and supply
chain management practices, businesses
can optimize market reach, maximize
sales potential, and drive growth and
profitability in international markets.
Managing international distribution channels presents unique challenges and
opportunities for businesses operating in global markets. From logistics and inventory
management to channel partner relationships and market expansion strategies, effective
distribution channel management is essential for optimizing market reach, maximizing
sales potential, and driving growth in international markets. Here, we explore strategies
and challenges in managing international distribution channels and achieving success in
global market penetration.
Understanding International Distribution Channels
1. Channel Selection:
Selecting the right distribution channels is critical for reaching target markets, meeting
customer needs, and achieving strategic business objectives. Consider factors such as
market segmentation, channel preferences, and competitive dynamics when evaluating
distribution options, including direct sales, agents, distributors, wholesalers, and ecommerce platforms, to optimize market coverage and penetration in global markets.
2. Channel Partner Relationships:
Building strong relationships with channel partners is essential for driving success in
international distribution channels. Invest in partner training, support, and incentives to
foster loyalty, trust, and collaboration with channel partners, ensuring alignment with
business goals and objectives and enhancing channel performance and effectiveness in
global markets.
3. Logistics and Supply Chain Management:
Effective logistics and supply chain management are critical components of successful
international distribution channels. Streamline logistics processes, optimize inventory
management, and leverage technology solutions, such as supply chain visibility
platforms and warehouse management systems, to improve efficiency, reduce costs, and
enhance service levels in global distribution operations.
Strategies for Managing International Distribution Channels
1. Market Segmentation and Targeting:
Segment target markets based on demographic, geographic, and psychographic factors
to tailor distribution strategies and channel offerings to meet the unique needs and
preferences of diverse customer segments in international markets. Customize
marketing messages, product assortments, and pricing strategies to maximize relevance
and appeal to target audiences across different markets.
2. Channel Performance Measurement:
Monitor and evaluate channel performance metrics, including sales performance, market
share, customer satisfaction, and channel partner feedback, to assess the effectiveness
of international distribution channels and identify areas for improvement and
optimization. Utilize data analytics and performance dashboards to track key
performance indicators (KPIs) and make informed decisions to drive channel excellence
and success in global markets.
3. Adaptability and Flexibility:
Remain adaptable and flexible in managing international distribution channels to
respond effectively to changing market conditions, customer preferences, and
competitive dynamics. Anticipate market trends, regulatory changes, and emerging
opportunities, and adjust distribution strategies, channel configurations, and market
expansion plans accordingly to capitalize on evolving market dynamics and drive
sustainable growth in global markets.
#DistributionChannels #InternationalBusiness #GlobalMarketing
#SupplyChainManagement #ChannelManagement #MarketSegmentation #Logistics
#BusinessStrategy #GlobalExpansion #MarketPenetration