Outsourcing is an increasingly common business practice that allows businesses to become more efficient by letting third parties take care of services or some job functions. Simply put, it allows businesses to obtain better goods and services or better prices from an external supplier.
There’s a long list of benefits that outsourcing can offer your business. More often than not is a good practice and allows you or your company to be more efficient. Now, when it comes to domestic sourcing vs international sourcing there are some things to keep in mind.
Overseas Outsourcing is not the same as Offshoring
This distinction must be made because some people tend to use both terms interchangeably when they’re in fact two different things.
Offshoring means that the provider is indeed from another country. However, it does not mean that it is a third party, just a branch office in a different country. A very common example of this is the call centers – Many companies tend to open branches in countries like India as it is usually less expensive and it’s a good way of leveraging costs.
Overseas outsourcing, on the other hand, also means that the service or product is being handled somewhere else, but in this case, it is being done by a third party, not a branch. This is a good way of reducing your operating costs. However, you also can reduce costs and enhance your product or service by outsourcing locally.
A Quick Overview of Outsourcing
When it comes to your business, choosing the right partner will probably have the greatest impact out of all other choices. This billion-dollar industry has gained so much popularity that some companies rely completely on their partners. Others like Apple take advantage of the manufacturing benefits and also source some non-essential processes.
For some types of commerce going overseas might be a better solution, but there are instances in which domestic outsourcing makes more sense.
So, how to choose?
The best way to look at it is by analyzing your needs and what third parties can offer you. Here’s a closer look at some of the considerations:
Saving costs
This is by far the most common reason for companies to outsource. When it comes to overseas outsourcing, some countries like China (where the minimum salary is about $380/month) and India can have labor costs so low that many times is enough for people to make a choice.
This low overhead and manufacturing cost can greatly reduce the overall expenses of production. The same is true when you outsource some activities like email responding or customer support. However, due to the limitations in quality control and distance, outsourcing overseas can end up harming your company if not done carefully. As the saying goes, “Save a Penny, Lose a Dollar”
Leverage Your Time
Every process requires a certain amount of time and energy. Outsourcing does a great job at reducing the time you need to spend on these activities and focus more on the activities that will help your business grow. In these cases outsourcing serves as a way of leverage.
Flexibility
For a business to survive in this ever-changing world it must be able to be flexible and adapt.
Some unexpected events can require you to produce more units of your product, which is great if you already have some partners to work with.
This is a benefit that you can get from both local as well as international providers. Again, choosing the right one will depend on the limitations and advantages of each according to your business model and goals.
Domestic vs Global Outsourcing
Domestic outsourcing is gaining popularity as some companies are dissatisfied with the quality of oversea services, but that is not the only reason. There are companies that rely on domestic sourcing solely for the fact that they want to bring jobs back to the US.
Although working locally means that you’ll have to pay accordingly, costs can also be reduced. What you would have to pay for a service is Montana for example, is nowhere near what you would have to pay in New York.
The biggest advantage of domestic sourcing, however, is more focused on quality, whether it is a service or a product. Another great advantage of going domestic is that language, cultural and geographic barriers are definitely not going to be a problem as opposed to working with countries like India.
Global or overseas sourcing can also bring a lot to the table.
One attractive benefit of outsourcing non-essential operations is that you can reduce some costs without hindering quality. Very often some non-essential tasks which don’t require very high standards can be handled by other companies overseas, which can be translated into saving costs.
Another great benefit of going overseas is that it allows you to enter a different market. If you sell a product that can be produced in another country, you could also sell it in that country at competitive prices. This is how some big companies have been able to increase their reach. However, good planning is strongly recommended and lower costs don’t always justify it.
Which Is Better?
Each one has its own pros and cons. Outsourcing is a billion dollar industry that has led some companies to sustained growth and other companies to fail. Ultimately it depends on your service or product, your goals and your ability to manage it.
Outsourcing locally can be a better option for some delicate tasks that require more involvement from you and where language and culture is a barrier, this can result in much better ROI and overall a better experience. Non-essential tasks can be handled by outsourcing overseas, which can reduce costs.
Finding the right way to distribute your operations and manage the critical and non-critical parts of your business is what will give you the best results.
Doing it properly will make your operations more efficient, reduce costs where needed and increase quality where required. Either way, an exhaustive research of the company you’re going to partner up with is important. This will ensure that they are capable of meeting your demands.