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Benefits and challenges of outsourcing for industry

Outsourcing

Outsourcing is often seen as an answer for manufacturers but it can affect everything from productivity to company culture.

Outsourcing part of a process or service to a third party might seem like a simple solution but complexities should never be ignored as manufacturing involves the interplay of many factors, some of which are controllable, others aren’t. Outsourcing is often seen as an answer, but is it?

“Business leaders always have to be on the front foot, developing new products and strategies, defending the business against threats and looking for opportunities to gain an advantage,” says Neil Parton, managing director, elumatec UK.

“While outsourcing can deliver many benefits there are pros and cons that can affect everything from your productivity to your company culture.”

Here are some of the benefits and challenges you might face, according to Parton.

Speed to market: You can bring a new product to market faster if you’re not trying to do everything yourself. Use a third party’s skills and infrastructure to support and accelerate your new venture.

Staffing and skills: Outsourcing can solve many of the headaches around recruitment, training and retention of staff. Through outsourcing, you may be able to access specialist skills and knowledge that would otherwise be unaffordable or impractical.

“Outsourcing gives you access to a huge talent pool, and these days, that talent pool is borderless,” says Parton. “You may find third-party contractors who can deliver the quality and reliable service you need for a much lower cost than you could with either permanent or temporary contracted employees.”

Knowledge and innovation: Every industry has its ground-breaking pioneers, thought leaders and renowned experts. When you purchase their services, you gain access to that well of insight and ideas.

The challenges involved in outsourcing can include lack of control. “Even the best outsourcing contracts cannot guarantee there will be no issues,” says Parton. “The world is unpredictable. You inevitably give away some of your ability to control events when you outsource.”

Outsourcing often involves working with overseas suppliers. What happens if shipping is delayed? Or if there’s industrial action at a distribution hub? Does your whole operation grind to a halt for reasons outside your control? Imagine losing your contract to supply X, a product made using component Y, but you’ve agreed to buy Y from Joe Bloggs Industries for another two years.

Quality: Ensuring quality becomes more complex. Your contracted supplier may have a reputation for unblemished performance, but how does that impact your in-house processes or accreditations? What happens if an order you are dependent upon arrives and although it’s within agreed tolerance limits, it slows your progress or upsets some of your most valued clients?

“The issue of quality resonates with us a lot because we’ve had customers approach us in the past, stung by shoddy, outsourced components,” says Parton. “Seeking control and reliability, they chose to bring their production back in-house by investing in their own machinery.”

Confidentiality and security: How much of your sensitive business information are you going to reveal? Will your IT systems have to communicate with those of your new partner? Can you trust them? Can they trust you? What clauses will you need in a contract to protect your business?

Your culture: Outsourcing could upset your employees. You could damage your customers’ loyalty. You could affect your identity as an end-to-end manufacturer. You could have more difficulty recruiting. You could fundamentally change the direction of your operation.

So, is outsourcing the answer?

“Outsourcing should be carefully considered,” says Parton. “It can bring huge benefits but there can be significant challenges. Take time to think, and understand that outsourcing is not a reason to relax, sit back and let someone else take the strain. It’s something that, like every other aspect of manufacturing, requires ongoing management.”

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