Even if you run your own factory, manage your own warehouse and clean your own break room, chances are you’re still outsourcing something.
Think about it, you don’t operate your own internet service. You likely pay for online storage and backup. You probably use a third-party database. You’re already using someone else’s stuff for so many other things and whether you realize it or not, you're outsourcing just the same as you would for inbound or outbound support teams. So why is outsourcing personnel so different from outsourcing other key business functions? "It's because the knowledge gap and value is realized immediately," says Fred Weiner, CEO and founder of The Connection®, "they recognize someone else can provide the service more affordably, efficiently, and keep up to date with the latest technologies so they don't have to. Personnel outsourcing is a lot like this, but most people don't view it the same way."
Outsourcing has become a best practice in many industries. While there aren’t a lot of hard numbers to show how prevalent such partnerships are in the channel, the Direct Selling Association (DSA) 2016 Growth & Outlook Report said that nearly 70 percent of direct selling companies in the United States outsource manufacturing, assembly and generation of products and services to domestic vendors. And according to a DSA spokesman, “this undercounts the full amount of outsourcing, as it doesn’t capture outsourcing of things like payroll, legal work and logistics.”
Organizations who talked to us about their outsourcing experiences say that partnering with experts in everything from manufacturing to marketing has been critical to their success. Strategic relationships with product and service providers free companies to focus on their core competencies without the investment in and daily responsibility for such things as factories and fulfillment centers. Many companies rely on outsource partners to stay on top of regulatory requirements and changes, monitor consumer trends and navigate shipping and customs standards, among other market forces. This allows them to grow more quickly and cost effectively than they would if they had to spend the capital and time to develop and manage these pieces of their business.
As research shows, few companies want the expense of their own manufacturing plants, warehouses or fulfillment centers. Operating such massive, complex facilities diverts cash—and attention—from targeted business development efforts.
When it comes to warehousing, in particular, many organizations can’t be competitive with only one facility. Shipping from multiple, strategically located fulfillment centers has become the way to meet consumer expectation. So unless you are prepared to invest in and skilled enough to manage multiple warehouses that can drop product at doorsteps within two days of an order, for little or no delivery cost to the customer, it makes sense to outsource to a shipping expert. Outsourcing warehousing and shipping not only decreases your overhead, allowing you to pass along savings to customers, it can streamline your processes by shortening time from production to delivery.
Speed and efficiency are the major reasons North Carolina-based Touchstone Essentials outsources fulfillment of its organic supplements, says Chief Operating Officer David Isserman. Leveraging the locations and expertise of its warehousing vendors was a strategic way for Touchstone to fill an operational gap. “That’s the key component to outsourcing,” Isserman says. “To find out where vendors have that competitive advantage and that core competency that you, as a multilevel marketer, just don’t have the ability to capture.”
Roger Morgan, CEO of Texas-based pet food startup pawTree, says outsourcing production is the only way his company has been able to double sales every year since it was launched in 2014. It would have taken an enormous amount of capital to build and operate a food manufacturing plant—something that didn’t make sense for his startup, which has aggressive growth plans. “I can’t think of any other way to do it,” Morgan says. “There’s not a chance I would take that on.”
Trusting a third party with a critical operational component of your business is a big deal. Companies and outsource providers agree that such trust comes from ongoing, clear communication and explicit accountability standards. You need to help your provider understand your vision and values. Make sure your provider speaks your language so that it becomes a seamless extension of your company. “Our vendors are really representing us by the way that they handle the service they’re providing us,” Isserman says.
Fred Weiner, CEO of The Connection—a Minnesota-based provider of customer contact services—says “it’s all about the brand” when his company partners with a client. “Everybody from myself to the Client Service Managers will live and breathe the brand and will wind up being experts in the client’s culture,” Weiner says.
It’s not enough to talk the talk, though. Vendors must provide a consistent, measurable level of service. Sometimes the outsource provider will write service guarantees into its contract. Other times, the org will dictate the terms of acceptable performance. Either way, a successful outsource partnership will evaluate its success based, in large part, on quantifiable outcomes.
Access to data is critical in an outsourcing relationship, Weiner adds. The Connection’s clients can see real-time reports on the company’s service levels 24 hours a day, seven days a week via an online dashboard. Reporting everything from the average call time to the number of abandoned phone calls, the dashboard provides a clear picture of how The Connection is performing for its partners, he says.
In general, the most successful outsource providers understand their clients from the inside out. They are focused on so much more than competitive pricing. They know that their clients’ wins are their wins and that their clients’ challenges are their opportunities.
Loss of control. It’s a common fear among organizations when they think about outsourcing. But successful outsourcing partnerships are a calculated blend of holding on and letting go, with the Client deciding when it will be in the driver’s seat and when it will hand over the wheel.
For example, when it comes to manufacturing, many companies work closely with their factory to determine—or to take ownership of—where ingredients or materials come from down to what type of packaging material is allowed and what isn't.
The bottom line is, you are in charge of what you let another company do for you—which is, itself, a form of control. You decide what your knowledge is and what your competencies are and where there are holes. “If you recognize that there are some gaps in your team’s expertise and experience that can be fulfilled by a third-party provider, then it’s worth researching an outsource option.
While you’re overseeing processes, don’t forget that one of the reasons you chose outsourcing to begin with was to clear your plate. If you partner with outsourcers who understand and treat your business like it’s their own, you can confidently step back from certain areas.
Experienced third-party outsourcers stay up-to-date on the latest regulations, rules, technologies and trends so you don't have to. They make sure you're informed of the relevant items that could impact your business and ensure your program comply at every step. They are always looking at compliance, service, and quality as well as maintaining the integrity of your program. A strategic outsource partner also should have enough experience in your corner of the market that it can leverage lessons learned from serving customers with similar goals and challenges. They can make you aware of trends to embrace and fads to avoid.
From data collection and analysis to process improvement strategies, outsource partners have a collection of tools that can help refine an organization’s focus and fuel its growth. Your partners are behind the scenes making sure you have the support you need to grow your business.
When an outsource vendor also provides valuable consulting, it can help you make smart investments as you grow, says The Connection’s Weiner, who helps his clients minimize the number of contact center staff they need as they grow, which controls their overhead costs. “If you double in revenue, you’re not going to have to double the size of your contact center,” he says, because a company can address many customer issues through web chat, social media and other digital tools. “When they’re taking off,” he says, “they’re chasing all sorts of infrastructure issues, and the last thing they want to be chasing is a contact center process to scale from five people to 150 people.” In a strategic outsource partnership, a vendor can help a company avoid unnecessary expenses, which frees capital and cash for growth initiatives.
Outsourcing is a massive global business. According to smartceo.com, the outsource market reached as much as $136 billion in 2014, funding more than 900,000 jobs at 162,000 companies. It has become sophisticated, strategic and standard.
Because you have a million moving parts to manage every day, maybe just the thought of adding one more cog to your wheelhouse feels overwhelming. The decision to outsource is not an easy one—nor should you take it lightly. Your business is your baby, and it makes sense to be deliberate about allowing someone else to help you care for it.
Make a pros and cons list. Ask yourself, and potential outsourcers, hard questions. Choose a vendor you can trust with the kind of information and responsibilities that successful strategic partners need to contribute to your success. Team National’s Chrysler advises you to get recommendations. Ask your peers, “Who are you using? How are they helping you?”
Look at Apple as an example of a company for which outsourcing is a major factor in the company’s ability to remain innovative. “Does it become the best glass company?” he asks. “The best chip manufacturer? The best fulfillment facility? Or does it pick and choose what it can do and pick the best outsource partners to become
Think of outsourcing as a way to expand your vision and your team, to leverage external talent and experience to help you achieve your goals. But think of it also as a way to set the bar higher, to be a leader in your field. There are valuable sources out there. Bring them in.
If you have questions about whether call center outsourcing is right for you, contact our team of Consultants at The Connection® at (800) 883-5777 or connect with us online.
Originally published in Direct Selling News Magazine by Heather Martin
Publish Date: November 27, 2017 5:00 AM
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