Successful outsourcing means more than just picking the right supplier. It’s now a mainstream strategy, it’s an indispensable part of small business operations.
But, what do you outsource? – IT, Human Resources, Wages, Training?
Should you avoid outsourcing areas of your business that directly impact your customers?
For example, is it better to outsource IT to one supplier or to contract with a few suppliers and choose the best one for each type of work? Failing to outsource effectively can cause damage to your business.
Outsourcing was the subject discussed at the Business Exposure Group meetings recently and members engaged in a lively discussion as to the benefits and pitfalls of outsourcing.
Successful outsourcing achieves:- cost reduction / achieving KPI’s / reduced time to market / process improvements / business agility / increased innovation / commitment to change with enthusiasm.
However, research shows that 15% of business owners think that outsourcing delivers reduced services, poor quality, and costs more when management and overseeing are factored in, and there is evidence of a high failure rate in outsourcing. The biggest hurdle to overcome is that the contract or piece of work must be commercially significant to the supplier, if the buyer is to receive an appropriate level of service.
Businesses can’t be as efficient in this day and age if we handle all tasks internally. But what is crucial to overcome the high failure rate is to have some sound service level agreements detailing: the minimum service offering / dealing with on time delivery / the volume of work / and the suppliers availability if your business needs a quick fix.
Time invested in managing outsourced relationships is time well spent but when choosing suppliers for outsourcing consider the following points:
-How do you get suppliers to collaborate with your established functions?
-How difficult will it be to swap outsourced suppliers?
-How often should you meet with suppliers?
-Lay down your terms of business clearly and set clear goals with service level agreements.
-What attitude should you expect from your supplier? They must show
a passion for excellence, rather than just satisfaction
commitment to success
take ownership of the work
bring brainstorming to the table
go above and beyond the contractual expectations
-Can you invoke penalties for failures in service / delivery
If you choose suppliers well then you will have a great resource, which is about much more than just saving costs. It’s about skill, innovation and giving your business a competitive edge.