Outsourcing can either be a big advantage or a big drag for your small business – how can you ensure outsourcing is working for you, and not becoming a weak link or a constant distraction?
Outsourcing pressures are enhanced for small business and start-ups, as these relationships have genuine potential to propel your business forward.
While there is no magic formula, these tactics to how you approach outsourcing will increase your chances of success.
Understand why you are outsourcing
Is it to save money? Build more flexibility in the business? Add value for clients? To gain specialist expertise? For convenience? To help you grow? Hopefully it’s more than one of these benefits.
Knowing your motivation is an important first step and gives you an idea of what success will look like. If your only motivation is to save money, then you need to be careful as it can become a trap – you may be saving money, but are you driving your business forward?
Understanding your true reasons for outsourcing provides clarity later, and the correct parameters to measure success.
Watch the price trap
Choosing providers based on price rather than service is the biggest mistake you can make. This was backed up by a transport and warehousing survey by Lexian, conducted in conjunction with MHD Magazine. These quotes from the survey reveal ways in which choosing on price can backfire:
- “A national retailer of appliances, furniture and electronics found that it was losing retail business, which was attributed to poor service levels at the delivery stage. They had originally engaged a transport provider based mainly on price. They have now engaged an alternative provider based on service levels.”*
- “A food manufacturer commented that they now have an issue with transport service levels as their accountants drove the transport vendor selection entirely on price as ‘to make the deal look shiny!’”*
- “Another transport provider related that initially customers ‘go on price’ but further down the track, service becomes more of an issue for them.”*
Like buying a cheap pair of shoes which soon fall apart, choosing the cheapest supplier is false economy, often costing more in the long run.
Remember the human factor
The human factor is the glue in any outsourced relationship, just as it is with your employees. Do you have similar company cultures? Do you like the person, or people, you are about to engage with?
Business is best when you are doing business with people you like. Naturally, they need to be skilled as well. But consider approaching outsourcing like you would when hiring new employees – the similarities are strong.
Just like assessing potential employees, you will have certain business philosophies and standards. Be patient and be prepared to consider various options. Try and find out some more about your suitors as people, find out what makes their businesses tick. If they are genuinely keen, they won’t mind meeting a few times, and they won’t mind starting on a trial basis, or starting small.
Measure your success
Measuring outsourcing’s impact may be done in many ways. Taking liabilities off the balance sheet is great, but there’s more to the picture. It’s best to have a few key parameters in mind before the relationship starts so both parties know what they are working towards.
Measurement traps include imposing unrealistic wishes and dreams onto your supplier, “moving the goalposts” later on, not communicating with your supplier, and being inflexible on what the relationship should deliver. It’s easy to be unrealistic about services in which you lack expertise.
An open-minded approach may help you discover benefits not considered beforehand. These benefits will often be beyond cost, such as more flexibility, happier staff members, better customer service, better responsiveness, improved product delivery – anything which helps make you a better business.
*Transport and Warehousing Outsourcing Whitepaper, Lexian September 2014
Walter Scremin, General Manager, Ontime Delivery Services