Keep it in the Family: Why Your Business Should Stop Outsourcing
Most companies will outsource certain aspects of their business. Whether this is labor, parts of wholesale stock. There are plenty of reasons for doing this: outsourced services can sometimes be completed quicker than could be achieved in-house, you may not think you have the time to focus on the tasks that you do decide to outsource, and you might think that it saves costs on expensive equipment or staff training. Yes, outsourcing can have its benefits when maneuvered correctly, and one person can’t take on all of the jobs and responsibilities of an entire business. But it is important that you don’t immediately outsource everything goes into the creation of your brand and products. Here are some reasons you might want to think twice about outsourcing and a few ideas to bring parts of your business back under your control and jurisdiction.
When you hand a certain responsibility within your business onto a separate, independent firm, you can face losing complete managerial control of your brand and products. Even if you have a contract, the other party will assume control of the task in hand. This other party may not have the same business outlook as you do. They may hold different morals, values, and priorities. They will doubtlessly have their business interests in mind, which will ultimately take center stage over your interests.
Public and Financial Liability
By outsourcing, you are affiliating your brand with another company that you will have no control over. If the other company comes into a scandal, you will also suffer the consequences of their actions. Sadly, most people will tar linked companies with the same brush. It is hard to distance yourself from a negative brand image once the damage is done. Another issue is that you will become financially tied to the individuals you are using for your outsourcing. Though you may not immediately see the link in finances, if the other business does go bankrupt, they can leave you in serious trouble. This could result in debt through loss of earnings.
Businesses who directly employ staff in the local area can gain a good rapport with the public they could be selling to. If you outsource jobs, locals can find themselves unemployed, out of pocket and bad feeling towards your company. At best, this will affect your company’s reputation with individuals in the local area. At worst, your brand could be boycotted. With the rise of social media, anyone can take a vendetta against your brand, so you must avoid any controversy at all costs. You want to keep your company’s image as positive and clean as possible.
When it comes to outsourcing stock, the motivation is usually profit driven. You might see that you can get what appears to be the same product from abroad for a much lower price. The problem with this? You often have to buy in bulk and won’t be able to see the tangible item until it arrives en masse. With the increased quality of image editing software, goods online can be made to look of a much higher quality than they are in reality. If the price sounds too good to be true, there’s a chance it is. Most of the time, you get what you pay for, and bargain basement prices will usually mean bargain basement quality.
Outsourcing companies are smart. They want to make a profit, just like the rest of us. So, if you are outsourcing products en masse, you may have to sign a contract to prove your loyalty to the outsourced company and guarantee a purchase of a certain quantity of products. This may reduce the price that you’re forking out overall. But the problem? You can’t keep up with changes to the market in real time. Sometimes demand will change, but your contract will not. This could result in leftover, unwanted stock which cannot be sold and will have to be disposed of at your expense.
Outsourcing vs. Keeping Things In-House
So, how should you go about deciding whether to outsource or keep things in house? The easiest way is to draw up a table of all of your current outsourced products and services. Weight up the pros and cons and decide yourself. Alternatively, seek professional advise on the matter from a financial advisor.
Things to Consider
Outsourcing labor to places with lower minimum wages is a tactic often taken by businesses seeking maximum profit. But there are many things to consider with this. Firstly, ethics. Is paying someone a lower wage than they can live on worth the extra cash in your pocket? If the individuals making your goods are miles away, you can’t oversee their working conditions to ensure that they are adequate. This could also impose on the overall quality of your goods. You will be unable to ensure that the best quality materials or equipment are being used.
There may be certain jobs in your company that you think you are incapable of carrying out. For example, coloring your products to a high-quality standard. The equipment required to do this may seem pricey at the outset, and you might think it’s cheaper to outsource to a company who specialize in coloring. In this example, powder coating ovens, such as those found here: http://www.reliantfinishingsystems.com/powder-coating-equipment/electric-powder-coating-ovens/. But in the long run, you’ll end up paying more out to have someone else do the job than you would have in buying the equipment and doing it yourself (or employing someone to do it).
Administrative tasks, such as payroll, are often outsourced. This is understandable for companies with thousands of employees. But if you only employ a small number of people, outsourcing is needless. All you need is an effective system and a little time to ensure that everyone’s pay is processed. The costs of outsourcing this menial task are simply not worth it. Employ an in-house accountant to do your bookkeeping. This is a task that requires professional knowledge, so is worth the investment.