Outsourcing: Means to Efficiency or Added Expense?

January 21, 2009 - 10:25

Although long employed by many manufacturing and customer-service businesses, outsourcing is just now arriving on the scene in the horticultural industry. So what is it, how does it work and what are the potential benefits? Simply put, outsourcing involves transferring the management and execution of a business function to an external service provider. Most horticultural business owners embrace the entrepreneurial spirit and are not receptive to “giving up” control or management of any operational functions, but as a business grows and evolves, the time demands on owners and key managers increase as well as the requirements of regulatory agencies and service providers, such as governmental agencies, insurance underwriters and commercial lenders.

The natural tendency for someone who has nurtured a business from infancy is to concentrate on the business functions that they deem most necessary, important and, consequently, enjoyable and rewarding. These usually include production, sales, marketing and relationship management, and usually exclude the tasks perceived as mundane or nonessential, such as human resources, safety programs, WPS training and regulatory conformance. As a result, execution of these unchallenging tasks is usually charged to a member of management who is perceived as having available time and not necessarily related to their main function or area of expertise. The result is usually a program that barely meets the minimum requirements and fails to achieve results that minimize costs and maximize profits. Here is where employing a third-party service provider with specific expertise to accomplish these functions makes operational and financial sense.

Benefits of Outsourcing

Lower personnel and direct costs. Using a third-party contractor places a fixed expense on quantifiable tasks and allows redeployment of previously required assets.

Improved quality. Employing an individual or organization with specific expertise results in performance that would be difficult or costly to match in-house.

Increased management time. Frees up time that management members previously devoted to the outsourced tasks.

Reduced educational and training needs. Keeping current on regulatory agency requirements becomes the responsibility of the service provider.

Efficiency. Implementation and completion of requirements happen in timely fashion.

Cost savings. Fines and surcharges are usually eliminated.

Catalyst for change. Employing an outside expert can facilitate a desired change in the perception of the company’s professional personality.

Technology. Outsourcing organizations usually are knowledgeable and employ the most current technology.

Increased customer satisfaction. Once non-core activities are transferred to a third party, in-house staff can focus on customer-related issues.

Final Thoughts

Once you get past the emotional challenge of releasing the responsibility for a business function to a third-party provider, ensure that the process results in increased efficiency and a better return on investment — note that we didn’t say decreased cost. The direct cost of using a third-party provider over in-house personnel may actually increase. What you need to consider is the overall effect outsourcing has on the business. This, of course, includes the direct cost. The following must also be considered to determine the net effect: increased efficiency, increased availability and redeployment of assets (time, materials and cash), and meeting and exceeding regulatory and service provider requirements and covenants. Intangible factors such as decreased worker absence, improved worker morale and an improvement in the professional perception of the business by employees, vendors, customer and competitors all play a role in the ultimate benefits derived from outsourcing.

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