The 8 Principles of Successful Outsourcing

Outsource Everything but Quality, Sales and Customer Service

For the most part, there is usually no shortage of products. There is, however, a big shortage of Purchase Orders. Why tie up precious dollars in bricks and mortar when you really need to spend them on marketing and merchandising? It’s possible, and in many cases preferable, to outsource as much production and services as you can. This gives you the time and funds required to control quality, give good customer service, and focus on the real challenge, sales. Here are some tips for effective outsourcing:

  1. Look for businesses that specialize in one or more aspects of your products production. They are either already an outsource service, or they are a business like yours that invested in facilities and needs the income you offer. (Many businesses focus on production and then try to sell their products; you can do it the other way around.) Reduce your investment risk and focus on sales.
  2. Write your own contract. He who writes, wins. Craft a contract that pays for finished, quality products, and not time or equipment. This way you do not pay for their mistakes or downtime. This eliminates the potential disaster of producing an inferior product yourself, and either trying to sell it or losing the money it cost to produce.
  3. Hire a cop. Even though you only pay for finished quality produces, you still need a manager on-site to monitor production. Make sure your production manager thoroughly understands the job they are inspecting. Excellent prospects can be found in the industry you need to monitor.
  4. Alter your product and packaging to be more efficient for the producer and their facilities. Clearly identify their constraints, equipment limitations, and profit centers. Your supplier generally will be happy to work with your producer. Bring them together at an early stage to help you make the process more productive for all involved.
  5. Don’t waste a perfectly good mistake. Make mistakes right. Start a checklist. Every time your outsourced service or producer (or even your own people or suppliers) foul up, write it down. Now, see what documents you can improve, like contracts, checklists, signoff sheets, labeling, or outlines of operations. With each mistake, you’ll just get better!
  6. Renegotiate your contract often. As you grow, you will experience volume buying and selling opportunities that may impact production, storage and shipping. Ideally, get your producer to hold inventory at no charge for a negotiated period of time to achieve efficiencies of scale in material purchasing.
  7. Be efficient. Work with your producer’s schedule. Make full use of your production day or shift. Get the best prices by being flexible and have all your materials lined up for last-minute shipping. Just-in-time production will save you on storage costs and ultimately reduce your cost of materials.
  8. Look for every opportunity to outsource. Every time there is an opening in your staff, ask yourself these questions: Can this job be outsourced? Can I reorganize my business so I don’t need that position? What other aspects of the total remaining job functions can be outsourced? Your most valuable staff have good oversight skills, understand quality control, and excel at sales and customer service.

Outsourcing can free up you and your limited capital to focus on Quality Control, Sales, and Customer Service. These are three of the most important elements of success. This is what your customer really buys. Instead of being stuck with less than perfect products you produced and now have to sell, consider outsourcing, and pay only for quality.


About Michael Houlihan & Bonnie Harvey

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