The different types of outsourcing

by | Jul 22, 2013 | Business

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In an effort to reduce operational costs many companies have turned to outsourcing. If used properly, outsourcing can be an effective tool to use in a company’s cost savings efforts. Out sourcing can generally be broken into four distinct groups; professional outsourcing, manufacturing, process and operational. Outsource purchasing is one of the many areas that are being targeted. Outsourcing has been shown as an effective way to maintain levels of support and output and reduce the overhead.

Although there are significant benefits in cost reduction, the process is not without risk, the largest of which is a drop in quality and a loss of control over the process.

Professional outsourcing includes specialized services such as legal, accounts, IT, product support and outsource purchasing. As the possible cost saving are very high, this is an area where outsourcing is becoming par for the course. It is possible with outsourcing to have access to resources and only pay for the services that are rendered. This has proven to be a significant contributor to cost savings and reduction in overhead.

Manufacturing outsourcing is usually industry specific. An automobile manufacturer for example can comfortably enter into an outsourcing contract for many components that go into the various models. These arrangements have a huge impact on cost and also reduce assembly time; the only real risk is an interruption in the production or logistics which will put the manufacturing process in jeopardy, as well as possible quality problems by these are usually limited.

There are other outsourcing opportunities that somewhat pertain to outsource purchasing, these are unique to process or procedure. In many cases it is more advantageous for a manufacturer to outsource components or parts to companies that produce these in volume, a good example may be LCD TV screens. This approach simplifies the manufacturing process by reducing the time required to produce the final product completely.

Outsourcing has found its way into the everyday fabric of society. There are many instances of a company, perhaps a soft drink manufacturer, outsourcing the product delivery to local trucking companies who even paint the manufacturers logo and identity on his trucks. In this way, the drinks manufacturer gets the same exposure but eliminates the costs and logistics associated with the delivery tasks.