Outsourcing

Somewhere along the line outsourcing has become a bad word. It is true that many jobs have been lost in the United States (and other major western economies) as low-cost production has moved to emerging economies with low-cost labor.

But, I would venture to guess, most outsourcing is done at home. No business has the resources or core competencies to do it all. Website designs are outsourced to specialist firms; legal matters to a law firm; marketing to an advertising firm.

Whenever a business has a need, it should carefully examine whether the need should be filled internally or externally. Which will be most cost effective? Which will provide least distraction to core business practices?Does the business have the expertise and equipment to do the job internally? What are the long-term implications of outsourcing or insourcing?

In my own little manufacturing operation we have been creating a wood lamp base with the total cost of material and labor amounting to about $30 for each piece. In examining the costs and in an effort to increase profitability, we requested and received quotes to have the piece made at larger shops with computer-controlled equipment. The cost for outsourcing will save about $18 for each piece! A no-brainer!

The fact is that from time-to-time all processes and costs should be re-examined to determine whether they can be reduced through internal process changes or from outsourcing (and the outsourcing can often be to a local business).

Will Limkemann
Siqua Group Limited