Subcontracting (or outsourcing) has recently been a hot topic in the busniess world. First, see what outsourcing. The definition of outsourcing on Wikipedia.com is as follows:
"... Refers to the delegation of operations in domestic production that are not based on an external entity specializing in the administration of this operation."
Although many might think that outsourcing is for large companies, they are mistaken. Outsourcing has many benefits, especially for small companies that do not have the volume of savings. The advantages are:
"... Refers to the delegation of operations in domestic production that are not based on an external entity specializing in the administration of this operation."
Although many might think that outsourcing is for large companies, they are mistaken. Outsourcing has many benefits, especially for small companies that do not have the volume of savings. The advantages are:
Reduction of production costs;
Price cut logistics and transport;
Increase the quality of the goods or services;
Increased market access speed;
Reduced capital commitments;
Greater focus on core operations.
Reduced production costs
Small companies do not benefit the economies associated with large production volumes may outsource production to large manufacturers. Larger manufacturers buy their raw materials at lower prices and efficient operations that produce large quantities at a lower unit cost.
Reduction of logistics and transport prices
Companies that distribute over a large geographic area with a low population density need to outsource the delivery of their products. No company can build a distribution infrastructure as effective as Fedex, UPS or Canada Post. Even on a local basis, companies can hire a temporary space for storage instead of building their own warehouse.
Increase the quality of the goods or services
Large companies that have specialized equipment will often be able to produce identical products, thus minimizing production defects. What is more important, the volume provides expertise to the large company, which focuses on the production of a single product.
Increased speed to market access
Outsourcing can increase your speed to market access. If you have a limited production capacity or do not have the space, subcontracting increase your speed. This also applies to services, such as a computer firm that implements a new computer system.
Reduced capital commitments
If you are unsure of the necessary volume of production, or if you have limited capital, you can reduce your capital commitments by outsourcing.
Greater focus on core operations
Some operations are not the heart of the operations of a company and do not add value to the product or service, whether outsourced or not. Outsource such activity allows you to focus on the critical operations to the success of your company.
In the advantages noted above, it is important to understand that it is about economics, strategic advantages and production capacity.
Price cut logistics and transport;
Increase the quality of the goods or services;
Increased market access speed;
Reduced capital commitments;
Greater focus on core operations.
Reduced production costs
Small companies do not benefit the economies associated with large production volumes may outsource production to large manufacturers. Larger manufacturers buy their raw materials at lower prices and efficient operations that produce large quantities at a lower unit cost.
Reduction of logistics and transport prices
Companies that distribute over a large geographic area with a low population density need to outsource the delivery of their products. No company can build a distribution infrastructure as effective as Fedex, UPS or Canada Post. Even on a local basis, companies can hire a temporary space for storage instead of building their own warehouse.
Increase the quality of the goods or services
Large companies that have specialized equipment will often be able to produce identical products, thus minimizing production defects. What is more important, the volume provides expertise to the large company, which focuses on the production of a single product.
Increased speed to market access
Outsourcing can increase your speed to market access. If you have a limited production capacity or do not have the space, subcontracting increase your speed. This also applies to services, such as a computer firm that implements a new computer system.
Reduced capital commitments
If you are unsure of the necessary volume of production, or if you have limited capital, you can reduce your capital commitments by outsourcing.
Greater focus on core operations
Some operations are not the heart of the operations of a company and do not add value to the product or service, whether outsourced or not. Outsource such activity allows you to focus on the critical operations to the success of your company.
In the advantages noted above, it is important to understand that it is about economics, strategic advantages and production capacity.
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