Even if revenues are high with a business, the high cost of doing business can radically consume profits and eat up a company budget. Many savvy managers try their best to cut down cost, but some aspects of a business are so essential that there is no way to completely trim those departments or services out. This is where outsourcing comes in.
What Is Outsourcing?
Outsourcing is when a business works with a third party to provide specific company services that the company may have provided before. For example, if the business manufactured a certain part to produce equipment the business sells, the company can outsource the manufacturing of that certain part to a different business.
What Are The Benefits of Outsourcing?
Outsourcing allows a company to reduce its budgetary scope by allowing a third party to provide internal or external functions that will benefit the business and its customer base. Consider all the departmental and commercial duties a business needs to conduct. If some of those duties were given to a third party to conduct, then the business will save time and money. Outsourcing helps to reduce the costs associated with overhead, staff, risk and other expense that may minimize efficiency.
Outsourcing is also a gain for the third party company. Instead of keeping all business activities in-house, a business will contract with the third party to conduct a specific business activity. This provides jobs and opportunities to new businesses specializing in outsourcing duties.
The Manufacturing Example
One of the best examples to illustrate outsourcing is with manufacturing. Before outsourcing, one single company would need a single factory or several factories to produce one manufactured product in-house. This would require immense labor, capital, and supply costs that would consume company revenues, no matter how large their profits could be. With outsourcing, a manufacturing company could outsource to companies that would handle specific aspects of the manufacturing process. As a result, the manufacturing company could downsize whole departments and costs associated with their productions. The outsourced company would produce certain products that are then returned to the contracted company to complete the manufacturing process. Overall, this process is radically cheaper than having everything done in-house.
The manufacturing example is one of the most used examples with outsourcing. However, other examples of in-house and external business functions can be outsourced to other companies. For example, warehousing businesses, like Elite Ops fulfillment warehousing, provides businesses with inventory and storage needs so a business does not need to invest immense money on its own warehouse. Web programming can be outsourced so a business does not need an in-house staff to curate and run the company’s website. Accounting departments can be outsourced to a third-party, cutting down on the business’ staff. Even one of the most essential service functions, customer service, can be outsourced to call center businesses.
Save Your Business Serious Money
Outsourcing has the potential to help big and small businesses save money and increase efficiency. Whether the business is a start-up or a large corporation, outsourcing has great potential for the business and its customers.