Today, outsourcing is a strategic tool that companies, large and small, are using to achieve their objectives in a highly globalized and interconnected business world. In broad terms, outsourcing is letting one or more business functions or operations to be handled by a third-party service provider. Thus, by outsourcing non-core activities, companies can give full attention to their core competencies, reduce operational costs, and acquire specialized expertise. However, not all outsourcing types are created equal. The six basic types of outsourcing exist for companies when tailoring to their needs and goals. The following showcases the six types of outsourcing and their potential benefits to your business.
1. Professional Outsourcing
Professional outsourcing involves the delegation of a function that requires specific expertise or specialized knowledge. Some examples are accounting, legal services, marketing, IT support, human resources management, etc. The main advantage of professional outsourcing is that it permits organizations to utilize expert assistance without the need to hire full-time personnel for these functions.
Benefits:
Expertise: The advantage of specialized knowledge and skills of professionals.
Cost Minimization: Not having to incur expenses for maintaining full-time staff.
Flexibility: Altering services easily depending upon business requirements.
2. Manufacturing Outsourcing
Manufacturing outsourcing is a common procedure among companies that want to produce physical goods. It involves giving the entire or a part of the manufacturing process to a third-party manufacturer either locally or overseas. This form of outsourcing can cut back production costs and offers a chance for companies to concentrate mostly on product design and marketing.
Benefits:
Cost Minimization: Cut down production expenses by engaging third-party manufacturers.
Existence: Effectively streamline the production procedure.
Focus: Concentrate on product design and marketing.
3. Process-specific Outsourcing
Process-specific outsourcing refers to the outsourcing of specific business processes or operations to an external service provider. This may include customer service operations, data entering tasks, logistics, or supply chain management. Companies generally resort to process-specific outsourcing in their quest to flatten their operations and increase efficiency.
Benefits:
Efficiency: Streamlines processes of the business.
Expertise: Accesses specialized services for specialized tasks.
Focus: Concentrates on other aspects that are core to the business.
4. Operational Outsourcing
Operational outsourcing is an arrangement in which the entire operation or department, such as customer service or IT, is handed over to an outside provider. That provider then manages the functions in relation to the company, taking full responsibility from end to end. It allows a business to focus on their core competencies while giving the non-core functions over to the experts that can perform them.
Benefits:
Focus: Concentrate on core competencies.
Expert Management: Ensure everything non-core is executed by an expert.
Scalability: Operate with ease, no sweat.
5. Project-Based Outsourcing
Under project-based outsourcing, a company outsources an entire project or an important portion of it to an external service provider for planning, executing, and delivering such a project within the agreed period. This type of outsourcing applies to projects that require specialized skills or resources that are not available internally in a company.
Benefits:
Expertise: Contracting for specialized skills and resources for projects.
Efficient: Ensures seamless and timely project completions.
Focus: Working on other organizational priorities.
6. Offshore Outsourcing
Offshore outsourcing is defined as contracting business functions or processes to the service providers located across the borders, usually in countries where the cost of labour is much lower than that in their home country. Offshoring of business services saves substantial costs and allows for highly available operations, thanks to variance in time zones.
Benefits:
Cost Savings: Take advantage of cheaper labour abroad.
24/7 Operations: Different time zones enable continuous business operations.
Efficiency: Improve overall efficiency with dedicated offshore teams.