Outsourcing for More Efficient Companies
As a corporation, it’s important for you to be aware of your strengths and weaknesses. Then, with this knowledge, you can opt to do what you are good at and pay another company to do what you are less good at. It’s the smart way to do business. For example, one area that you may not want to deal with is the warehousing of your inventory and finished goods. If your home office is located in Texas, you can hire a Texas Contract Warehouse or a Houston 3PL (third party logistics) warehouse. If you are in California, try a California Contract Warehouse.
In the past most companies considered it to be good business to set up the business and do all work within the company. The founders of the corporation would choose the products to be sold and would do all of the design work. This is the core of the corporation. Another core activity is sales. The sales department needs a strong loyalty to the company and the product and a full knowledge of the product.
Over time, it was discovered that a corporation could be leaner and meaner if it concentrated on these core departments. That meant that maybe someone else could do some of the tasks better and more efficiently. Two words apply to these types of tasks: outsourcing and outside operations.
One department that a company can outsource may be human resources (HR). There are many companies that specialize in handling the benefits for a company. These companies can help other companies to select the best medical and other insurance for the lowest cost. Other HR-related responsibilities include processing the payroll. For bringing new employees on board, recruiting companies are available.
Another area can be outsourced is information systems (IS) or information technology (IT). In this area, too, professionals who specialize in network setup and maintenance can give a company excellent service.
Outsourcing software development and technical support to companies in foreign countries is a newly popular strategy. This solution is attractive to corporations because these foreign workers can live well in their countries on less money that is required for domestic employees. (However, domestic workers suffer deprivation when this work is no longer available to them.) Two disadvantages of this outsourcing to foreign countries are the time difference and the language barrier.
Outside operations are used by the manufacturing department. If the company is manufacturing its own product and has not outsourced the manufacturing, there may still be some manufacturing processes that they can’t perform or choose not to perform. In this instance, the in-process material is sent to a vendor, who then works on the material. One example of a process that is often performed by an outside vendor is heat treating.
Finally, the corporation may not want to run their own warehouses. Or maybe they have a small warehouse but may need additional space at certain times of the year. These corporations would want to make use of contract, or 3PL, warehouses.
Theoretically, a company could consist of only the core departments, with all other work being outsourced.