Production outsourcing – The optimal solution for scaling company
“If there is something we cannot do more efficiently and cheaper than our competitors, we should hire someone to do it better”
Henry Ford noted in the early 1930s and by doing that he gave the simplest definition of outsourcing. If the founder of a car company were talking about this phenomenon today, he would add that both in the version of foreign (offshore) and domestic (onshore) providers it is a management strategy based on tasks delegation between companies that are not directly related to their core business.
Time and space – the two main barriers to development were broken in the 1990s, at the beginning of the technological revolution. The world has become much smaller also for outsourcing. Services that were not previously traded, such as IT, customer service or accounting were a new foundation for its development. Until today, apart from simple services, there are other, requiring specialist knowledge from the supplier. Call center, invoicing, or complex research and development processes. Small and medium companies and those that belong to the global top 100. In the 21st century, contrary to many opinions, everyone and everything can be outsourced. The most interesting thing that remains for the managers of the whole world is the effect.
Globalization and crisis – the main impulses of the strategy
Companies trying to adapt to the globalization market are forced to increase efficiency and focus on their main competences. The need to constantly increase demand entails a desire to reduce costs, improve the quality of products and shorten the time to market. In order to meet the requirements of consumers, the goal of acquiring industry knowledge in the field of new technologies appears. Outsourcing can also be an instrument for changing the business model of a company, its deep reorganization, as well as an element of company integration after a merger or acquisition.
Perfect outsourcing, or win-win contract
In the 1980s, General Motors introduced the iconic Chevrolet Nova model to Latin America. Legend has it that the lack of success in the sale was the result of ignorance of cultural differences, and more specifically of the Spanish language, in which no va meant the same as not driving. Regardless of the truth of this story, this is an example that perfectly shows the main reasons for failure in implementing outsourcing strategies. Therefore, we are talking about the lack of proper communication and the buyer-supplier relationship, to which should be added a faulty verification process of a potential contractor based most often on one factor – the price criterion. Hurry is another opponent of a mutually beneficial contract, for which it is necessary to deliberately and independently define their own goals and needs. The basis of effective outsourcing is therefore a detailed strategy based on a team prepared to implement the project.
Business trend of the 21st century
I am reviewing the latest Tholons Top 100 Outsourcing Cities ranking which identifies the most attractive cities for this industry. In the top ten half of the stake belongs to India, among which Bangalore and the capital – Delhi are ranked the most. To this we add Asian tigers – two cities from the Philippines and the Queen of the Orient – Shanghai. Krakow – the first European city in the ranking is ranked 11th in the world and is the best place on the old continent for the development of three main areas of outsourcing, namely shared service centers (SSC), business processes (BPO) and knowledge processes (KPO).
This ranking, just like the unprecedented growth of Poland in the context of this phenomenon, perfectly shows the trend that currently prevails in the world of entrepreneurs. Wisely introduced outsourcing, despite the fact that it is not a panacea for all the problems of the company will be an increasingly perfect complement to its growth and guarantee competitiveness on the global business map.
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