Six Critical Mistakes to Avoid
in Outsourcing Your Business Processes Many companies across the country are in a rapid stage of growth and development. For some the challenge of managing their growth is a daunting task riddled with uncertainty and complex decisions. They wonder if the trend is continued growth, and if so, how will that affect their company? For others the challenges with growth are resources and expansion. They ask how they’ll accommodate their growth and how their company will respond to the need to grow globally? All fast-growing companies are faced with an extensive range of problems and choices that are industry specific and unique to each company and business processes. We hope to give you some great ideas and ways to avoid mistakes when it comes to making decisions that will affect the growth of your company.

#1– Not Choosing To Outsource
If you were able to focus your time on what made your company money instead of the Non-core Business Processes, what would that do for your company? If you didn’t have to worry about your warehouse, product production, supply chain management, order fulfillment and returns, how much time would it save you? For many companies the knowledge of outsourcing and its benefits are not even in consideration for making key business decisions. Outsourcing is often overlooked or not seen at its full potential. According to Brent L. Peterson, author of The Smart Way to Buy Information Technology, “The number one mistake companies make is not knowing why they want to outsource. You need to have a clear picture of what you want to achieve.” Outsourcing is taking your Non-core Business Processes (warehousing, assembly, etc) and having them done by a trusted third party. This gives companies the flexibility to move and adjust more quickly and more efficiently to the constant changes of their business or industry. How can outsourcing help you and your company?

#2– Companies Not Focused on Core Business Processes
Do you know what your company’s Core Business Processes are? Do you know what areas of your company drive your business? Most companies do a pretty good job of knowing why they are in business and who they serve. However, the majority of companies do not make a clear enough distinction between Core and Non-core Business Processes. Failing to make this distinction results in time and money spent focused in areas that don’t drive business. Core Business Processes could be defined as those areas which drive business and increase profits. Most companies treat all areas of their business as Core Processes. All parts of the business are important but only Core areas are driving your business. For example, product development is an area that would be a Core Business Process but once this product moves to production and fulfillment you have moved to a Non-core Business Process. If you could focus on your Core Business Processes, what new product could develop? If you outsourced your Non-core Business Processes, how much money would it add to your bottom line?

#3– It Costs Too much To Outsource
Most companies assume that it will cost more to outsource than to do it themselves. This is a common misconception. Many companies fail to figure the fixed and variable costs associated with their Non-core Business Processes. For example, when considering the fixed and variable costs of running your own warehouse you have a lease, common area maintenance, utilities, racking, equipment, supplies, labor, insurance, workman compensation, property taxes, etc. All of these costs are associated with one area that is not a Core Business Process for your company. A similar list may be compiled for production, fulfillment or other Non-core areas. While the same costs will affect an outsourcing company, their Core business is warehousing, fulfillment, procurement, kitting and assembly, and supply chain management. How much is your company spending each year on Non-core Business Processes? How much could you save if you outsourced those processes? How much time will outsourcing give you to focus on your Core Business Processes?
#4– Non-core Business Process Should Be Done In-house
Many companies make the mistake of thinking that Non-core Business Processes are easily handled in-house. While other companies feel they will somehow lose control if they outsource. These are common mistakes made by many companies. Most of the companies that make this choice quickly find that these processes are far from easy and end up taking a lot of time and energy away from the company’s Core objectives and focus. Companies usually spend more money in hiring more personnel and buying expensive systems trying to fix and control the problems that could have been avoided in the first place.

#5– Not Comparing Outsourcing Companies
If asked what sets your company apart from your competitors, you could probably think of several reasons or competitive advantages that distinguish you. Outsourcing companies are no different. Business is often awarded to companies that offer the lowest bid yet those companies may not fulfill all of the business’s needs. Make sure you know what level of service your company will be receiving and what your outsource company is capable of doing before you make your decision.
#6– Outsource Partner Needs to be Local
Another common mistake is thinking that your outsource partner needs to be local. The decision to outsource should be an easy one. Finding the right fit and the one that meets your needs may take a little longer. As long as you do your homework and all of your company’s needs are clearly defined, your outsource partner will be an extension of your company and their location should have little to no bearing on your decision. Your outsource partner’s online access 24/7 to inventory and their reporting tools will give you peace of mind on all your Non-core Business Processes. As long as you have chosen a partner that can guarantee your inventory, order and on-time delivery accuracy of 99% or better, you should be able to relax knowing that your products are in good hands, and spend your time on your Core Business Processes.