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Outsourcing - A New Concept?
from: Robert BermanOutsourcing is a new term for something that manufacturers have
been doing and continue to do since the beginning of time. No
matter what anyone says every manufacturer out sources products,
parts or components of its products. If you manufacture
garments, you probably purchase fabric, buttons, thread, and
zippers. If you manufacture a piece of electronic equipment, you
outsource the manufacture of the wire, connectors, electronic
components, and cabinetry. If you make signs, you buy paint
and/or media material. Any time you contract with another
company to provide you with a part, component or labor that will
allow you to complete your product you are outsourcing.
The key to successful outsourcing is to have the appropriate
procedures in place to deal with product made in someone else's
facilities. This includes:
· Qualifying the outsourcing company prior to contracting with
them.
· Providing them with easy to understand and detailed
information with respect to what services you require them to
perform.
· Implementing a QA/QC procedure that verifies that they are
performing, as you desire.
If you are contemplating outsourcing to third world
manufacturers in countries such as China, Mexico, Thailand, or
Malaysia you have to take into account the added expenses that
will be incurred due to language, communications, freight,
import costs, and quality control. Coupled with this are the
costs associated with the return or rework of parts received and
the potential problems of late deliveries. In many cases,
outsourcing to third world companies can be a penny wise, dollar
foolish exercise. Remember that many companies jumped on the
outsourcing bandwagon only to bring their production back home a
few months later.
My recommendation is to scrutinize the financial numbers and the
overall impact on your ongoing business before you proceed. If
your due diligence indicates that outsourcing is indeed the way
to go, start slowly if possible, in other words do not turn your
entire production over to an outsourcing company over night, but
rather phase it in.
Don't forget to factor in the impact that outsoucing may have on
your current sales. If even part of your sales pitch is
"quality" and/or "timely delivery", you may be shooting yourself
in the foot if you use outsourcing.
About the author:
Robert Berman is a business consultant specializing in business
development, strategic planning, acquisitions & mergers and
international sales & marketing. He has been a columnist for the
National Post Newspaper under the byline of "The Business
Doctor" and he has authored "The Business Buyer's Manual". He
may be reached at Robert.Berman@businessbuyersmanual.com
www.businessbuyersmanual.com
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