Outsourcing

[BusinessAdviser]

Do What You Do Best
Assess your strengths and weaknesses, then outsource the tasks that aren't your forte.
By: Tamara Monosoff | 1/2/2008

Just as any good business takes regular inventory of its physical assets, it's equally important to assess your company’s more intangible assets and liabilities. This is true whether you're a startup or a full-fledged, profitable business.

If you're in the startup stage--and likely your company’s only employee--then taking inventory of your company essentially means taking inventory of yourself. While it can be difficult to look inward and clearly evaluate your strengths and weaknesses, this step will allow you to make better business decisions as you move forward and grow.

Here’s an example: It’s a year into your business, and it’s time to begin selling on a larger scale. You’re also in dire need of a website. With all your other responsibilities, you only have time to take on one of these tasks immediately. If you've evaluated your strengths and weaknesses, you’ll already know which you should take on yourself and which you should outsource. If you’re fearless about tech but weak in sales, you’ll take on the website. If anything computer-related makes you break out in a rash, you’ll take on the sales segment and hire a web designer. Of course, this is just one example. By taking a complete inventory of all your assets and challenges, you'll have guidance for all kinds of decisions.

Getting started is as easy as taking a piece of paper and drawing a line down the center. On the left, write down your assets: What strengths do you bring to the company, including skills, capital, knowledge and contacts? This is no time for modesty, so don’t downplay your abilities. On the right side, write down your challenges: What weaknesses do you need to acknowledge and address?

This exercise is essentially what one successful entrepreneur I know did. She was completely tapped out with too many tasks to manage, and she was spreading herself too thin to do them all well. So she evaluated her strengths and pinpointed her weaknesses. She realized that the stress involved in running her apparel-manufacturing facility was taking its toll; her strengths were designing the clothing, sales and publicity, not necessarily running a factory. She recognized that she didn’t have to do it all, so she sold the facility and began outsourcing the manufacturing end. She never looked back.

As your company grows, you will inevitably be pulled in more and more directions--away from the core strengths that led you to begin the company in the first place. If your strength is sales and networking, for instance, you may find yourself bogged down with internal management issues that take time away from what you do best. If you’re great at designing or developing products, you may lack the time to devote to it. At some point--especially when resources and profits begin to grow--you may find it’s critical to focus more on core competencies again and to oversee consultants or employees who handle other areas of your business.

Don’t forget to ask for help from friends and family members with skill sets you may not have: your niece who’s organized, your best friend who’s a great writer or your husband who’s a whiz with numbers. All can help you build your business. Chances are they’ll be excited to contribute.
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Courtesy of Entrepreneur.com

[enigmavaldez007]

totally agree ... outsource as much as possible...and concentrate on your forte. Great article.

[webgal]

Even in the area of web development, you need several disciplines ranging from product development (in some cases) to programming talents, writing to a target market, marketing know how and design. That's a lot of bases to cover and it's rare someone is super dude in all of them.

As a freelancer I can tell you it's hard to be the fax smudge fixer and IT department, accountant and copywriter. So I try and spread the love. I often like working with a team as it opens up new ideas.

[Gr-Andy]

I couldn't disagree more. Outsource NOTHING with your own dedicated staff you can manage your bussniess better. And most outsourcing companys outsouce to india that is bad for us and uk market.

[BusinessAdviser]

I couldn't disagree more. Outsource NOTHING with your own dedicated staff you can manage your bussniess better. And most outsourcing companys outsouce to india that is bad for us and uk market.

Hahaha. I just have to laugh. Rather than wasting my time arguing for outsourcing, I'll just refer you to a Macroeconomics 101 class (specifically Day 1: Comparative Advantage) and laugh a little more to myself. Good luck in business. You'll need it.

[perdesign]

Outsourcing is good choice!

[allysa]

great article. 100% agree!

[Virtual_Assistant28]

Yeah, I am for outsourcing, it gives me more job. Hahahaha!

[Jochen]

I agree that outsourcing can seem very tempting to all, but you still need to take into account a lot of hidden costs, especially when outsourcing to low cost countries.

For example communication costs; how will you manage your subcontractor? How closely will you need to follow its progress...
Another example are obviously hidden quality costs, especially in a manufacturing environment. If lead times are not respected or products have to be reworked over and over again, you will loose a lot of money on your outsourcing and loose face to your customers

Core compentences of course should not be outsourced (unless your short term capacity is unsufficient), but not all other processes should be outsourced. Consider the impact and strategic importance these processes have on your business and perform a risk analysis.

Conclusion: choose your battles and try to assess the total cost picture

[metagistics]

I agree that outsourcing can seem very tempting to all, but you still need to take into account a lot of hidden costs, especially when outsourcing to low cost countries.

I agree. But I've also learned over the years that outsourcing also lets you discover a lot of internal hidden costs as well. Case in point, outsourcing logistics. You have three guys in your warehouse that work at 60% productivity. They look busy, but during slow times they aren't working at 100%. Thus you have a hidden cost.

Then factor in core competency. How much managerial overhead is spent managing a process that's not part of a core competency. Again, a hidden cost. Factor in antacid medication, another hidden cost

Other concerns center on loss of control and service levels. These concerns can be overcome by a solid partnership agreement and data sharing models. If requirements and expectations are mutually agreed upon and information and communication flow freely, control is managed rather than lost.

JMHO

[Jochen]

Hi there,

thanx for your insights and you make some valid points... I myself have indeed experienced the fact that loutsourcing logistics can be a very good move.

Taking into account the large scale benefits the 3PL's have (they have the 3 employees working 100% all the time for you and your competitor, ) and (as you mentioned) the fact that it's their true core competence makes it a wise move. If you have clear SLA's normally your operations will only become more cost efficient.

I've noticed however that when outsourcing part of your production, things are a bit different...
First there's the aspect of quality. A lot goes wrong when you ask another player to produce your product, you've been producing for years in the correct quality... So always watch out that the parts your outsourcing really is a core competence of the subcontractor (outsource what someone else is better at!).
Secondly, you are adding another logistical step, which involves communication and risk of wrong deliveries (quantity, damage and timing!). So the wise thing to do here is to make sure that what you outsource is in fact not a critical part of your product but rather something that does not add as much value as the other production steps you undertake in your plant. It is not worth your time and money. Make sure you buffer these operations in time or quantities, because (especially in the beginning) it can be a bumpy ride!

Greetz,

Jochen

[allysa]

we outsource workers for our web development projects, we have a big savings on time & money.

[GlobalIT]

I couldn't disagree more. Outsource NOTHING with your own dedicated staff you can manage your bussniess better. And most outsourcing companys outsouce to india that is bad for us and uk market.

To some extent yes there are several skilled labor positions that are used in India. But my organization has our help desk & operational mang in Buffalo, NY. I wanted to make sure the 250+ jobs did not get sent overseas. There are a few of us out here that try to keep as much as possible in the states.

[alluwanted]

To some extent yes there are several skilled labor positions that are used in India. But my organization has our help desk & operational mang in Buffalo, NY. I wanted to make sure the 250+ jobs did not get sent overseas. There are a few of us out here that try to keep as much as possible in the states.

The discussion itself says 'Do what you are good at. Outsourcing is about economics.

Make or Buy had been always an interesting topic in manufacturing. outsourcing is nothing new. We used to identify suppliers who can assemble a sub-assembly component for building a a bigger module in Electronics manufacturing!

There are many companies getting programming done through freelancers to save money. But then I came across a company that convinced a client that they can deliver the software application at a low cost and hired part time programmers from Belgium or some other country. That programmer did a good job for some time and then discontinued quoting personal problems. Then my friend had to run to another company in India to get it completed. Hence it is extremely important to check before outsourcing.

Outsourcing does help, if you plan properly, as you can concentrate on bigger issues.

[Dean-123]

Outsourcing in a Slow Growth Economy
In the face of economic downturn, it has been possible for companies the world over to remain profitable with more and more companies outsourcing and using freelance services to complete their projects. Professionals all over the world skilled in certain areas may be employed in jobs outside of their qualifications. This is not uncommon, and those with degrees in Information and Technology are susceptible to competitive market pressures and upon graduating take a job that is unrelated to their skill sets, which becomes a huge waste of resources.



Many professionals who have difficulty finding employment within their chosen field take on freelancing jobs as a means to engage their skills and remain current with the changing market environment. The entrepreneurial individuals turn this activity into a self employed business. And use online websites as a means to advertise their services and communicate with buyers all over the world. Outsourcing has rapidly become the best way for companies to reduce expenses and the focus now also encompasses how to do things quicker, more efficiently and get to the market quicker than your competitors.



In countries experiencing slow or negative economic growth little benefit is gained by completing projects in house. Moreover, companies will spend and lose substantial amounts of money to hire, train and manage all the benefits and salaries that must be paid. Outsourcing does away with many of the large costs involved and by hiring professionals outside the company to complete projects; businesses can not only reduce costs but also complete projects in a timely and efficient manner.

The beauty of outsourcing is in the simplicity of it all. The freelance professionals are already trained and lend their expertise to the project. The fact remains that retaining full time employees is not beneficial when work or projects are spontaneous or seasonal. However, instead of hiring a full time employee with long term pay and benefits, a company can outsource by opening the bidding to qualified freelance professionals who can either bid for a one time flat fee or offer reasonable rates for a few hours per week over the required period.

Under the online outsourcing system, there are two ways that freelance professionals can bid for projects. The first method is based on their individual merits and the price that they have bid for the project, the second and often favored method is again based on their skills and feedback, but the professional will also submit either a finished example or a detailed proposal for larger projects, but in this instance the budget has been set by the company. Then the chosen freelancer simply completes the project in exchange for the agreed price


When all the factors of outsourcing are taken into consideration, many companies discover that overall overhead costs are surprisingly low, the associated employee costs as compared to previous years significantly decreases and in well managed cases productivity significantly increases. In essence good business decisions, have more companies outsourcing their projects in an effort to streamline their business with a focus on future growth.

from usa.myTino.com