We are all aware of the process of outsourcing; it’s the process of moving your business process elsewhere, whether it is another business or somewhere abroad. A few of the known benefits are:
- Lower Cost
- Lower Labor
- Improved Quality of Product
- Faster Production
- Less Tax
- More Resources
Outsourcing usually goes way beyond your national borders and falls under the form of offshoring. The process itself is quite widely debated in regards to the advantages and disadvantages but it is not debated that choosing to outsource has a remarkable effect on the top and bottom line of your enterprise.
A prime example of a company choosing to distribute elsewhere is Dyson. In 2002, Dyson chose to manufacture in Wiltshire, however they decided to move their manufacturing to Malaysia. Dyson claimed they were turned down for expansions; however the Wilshire council denied this and stated that they were never approached. Dyson moved their Hoover manufacturing to Malaysia and later decided to move washing machine manufacturing there too.
Below Discusses 10 Crucial Reasons to why you Should Outsource:
- Outsourcing your manufacturing and labor leads to lower operational costs. These costs are usually fix rates for example; labor is cheaper due to minimum wage being significantly less in other countries. Other fixed rates such as premises and electrics are also considerably cheaper. This would have been a key reason for Dyson choosing to expand abroad.
- Many businesses choose to delegate the process offshore because they want to focus on the core fundamentals of a business. They often outsource the more tedious straight forward duties to enable their core workforce to concentrate on evolving the business rather than sustaining it.
- Having your business operate offshore enables you and your business to benefit from local knowledge and local resources. It is also opens opportunities to use those with world class abilities.
- By using offshore resources it will enable you to free up your resources. By freeing up your resources it enables you to directly benefit as you can use them when attempting to evolve your business, or even sell them on.
- It has been known that many successful businesses leave their internal facilities free for future developments.
- By outsourcing, it frees up your companies time. Through freeing up your companies time it can enable you to focus on more important projects. Outsourcing also means it can be left to those with expertise in a particular area, and then enables you to focus on your specialist skill.
With Dyson having fewer expenses for their manufacturing, they would have more money and perhaps more time to spend on research and development. As we all know research and development is a key fundament of Dyson’s success.
- Moving offshore allows companies to successfully mitigate risk and keep their company from danger in case a country suffers from a natural disaster, war or economic downturn.
- Outsourcing allows companies to re-engineer and change their business. As a result of processes being carried out elsewhere, your company may be able to start fresh and re-imagine itself.
- A company can also outsource to enable them to gain access to a new market. It can allow them to spread locally and intercept markets that may not be accessible to those who are not from that region.
Young entrepreneurs could really learn from the benefits of outsourcing. In an age where it is always beneficial to keep costs low and production high, young people could always benefit from taking their business abroad. It would be advisable to start production in the UK as it would be easy to test and the market and then look for foreign expansion in the future.
In summary, outsourcing has numerous benefits. However, just because it brings all these gains does not mean it is advised for every business. They will need to be financially stable before considering such an expansion. They also need to assess whether there is a need for them to operate offshore. The company may not be operating on a large enough scale to be ready to consider this or they may have no need to infiltrate a foreign market.
Therefore it is strongly advised to look into every avenue before electing to outsource or move offshore, because premature expansion is often a company’s downfall.