The biggest worry most companies have when it comes to lowering outsourcing cost is the quality of the output. Larger blue chip companies such as Apple Inc. and Nike may not care much about the quality of things such as customer support when it’s outsourced because their brands can handle the negative results of a poor quality service. However, most non-blue chip companies don’t have that luxury.
With that in mind, here are six methods by which you may lower your outsourcing costs while maintaining a fair level of output quality:
1. Stop Relying On Current Infrastructure
Not only should you shop around, you should also consider helping to finance the outsource company. Reliance on current infrastructure is the reason why many middle-to-larger sized companies have such little leverage when renegotiating costs. This shouldn’t be the case. There are plenty of smaller companies that could use your cash injection to build their business and become your newest outsource resource. Business process outsourcing (BPO) shouldn’t rely on what is available. If you are serious about outsourcing, then you should help create the companies and infrastructure that you will eventually come to rely on.
2. Work with Your Competitors
You don’t need to join unions and trade associations to enjoy good discounts from your outsource companies. Take the example of washing powder producers. There’s only a handful of washing powder manufacturing plants in Europe, but they’re able to produce enough washing powder for a continent because they use the same factories. Most washing powders are made using similar processes with similar ingredients. Instead of each washing powder company having its own factories, they outsource to the same super factories. Costs, therefore, are a fraction of what they should be, thanks to reduced costs across the board on everything from ingredients to transport costs.
3. Choose Inexpensive Long-Term Partners
If you want to be in the driver’s seat when it comes to costs, seek out long-term partners for long-term outsource contracts. Learn why or how the outsourcing company is able to charge such low prices, then do the same. How are they able to reduce costs on a long-term basis? For example, some will start with lower quotes with a loss-leader mentality. Once they have a long-term contract, they will start to scale back their operation and the quality of their work. Learn more about how the company is able to sell at a lower price before taking on long-term contracts.
4. Hire Freelancers
One of the biggest benefits for freelancer outsourcing is that you have instant access to a pool of free-range talent. For example, a few of your clients may have asked for affiliate ads using Flash programming. It is a one-off occurrence. Instead of training a staff member or hiring a new staff member for the programming job, you hire one or more freelance programmers to do the job. This saves the cost of hiring new full-time or temp staff. It will also cost far less than hiring a consultancy firm to do the work for you.
5. Consider Staff Downtime
Staff downtime is costly and simply unacceptable. Outsourcing can help avoid waste in this area. Take the example of a game developer that has highly skilled engineers and epic amounts of computing power. Staff have to render their designs and this takes a long time. During that time, computing power is slowed, and at least one PC is taken out of action. If the same company were to dramatically lower its computing power and use Cloud computing to do its rendering, it could save massive amounts on computing hardware and maintenance. Staff downtime would be reduced because no PCs are ever taken out of action.
6. Apply Modern Outsourcing Strategies
Most companies outsource to developing nations because minimum wages in the USA, Britain, and Europe are prohibitively high. Even mid-sized companies need multiple part-timers and temp workers to cover the fact they cannot afford a full staff of full-time workers.
Take the example of the cage manufacturer. The cages need to be manually pieced together, so an outsource company is used in a developing country so that many staff members may be hired to do the processing.
Machine automation can’t be used to put the cages together because the outsource company doesn’t have:
- the staff expertise to run them
- a reliable enough power source
- strong enough security.
Yet, if the cage company supported an outsource company at home, then the required expertise to run the machines would be present, security would be less of a concern, and the power supply would be ample. The outsource company could operate with just one-fifth of the staff required in the developing country. Also look at the costs and benefits of things such as supporting outsourcers who rely on automation over staff numbers.
The Takeaway: There Are No Easy Answers
There are no easy answers when it comes to lowering outsourcing costs. However, using the methods listed in this article will lead to stronger and sustainable success.
Photo Credits: stock photo
Question of the Week