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Reducing cost overheads through outsourcing
Cost overheads are one of the headaches of most of the companies. Besides, companies those depend on their classical sources of procurement and are sceptical about outsourcing often run huge cost overheads.
Most organizations can gain by not being rigid and mean, but by being flexible. Companies like Dell Computers and Nike have demonstrated that flexibility and speed can be attained through outsourcing. It is not just those who adapt fast will march ahead of the slow, but the flexible ones will be able to gain over the rigid. To stay flexible, outsourcing most of the functions is one of the most effective ways. Again, as of earlier example, Dell Computer and Nike no longer manufacture most of the parts or components they need. Rather, these are outsourced from offshore companies.
This has resulted in those companies leaving aside their traditional supply chain network and now they can easily adapt to change parts and components as per the demands and specifications of the customers without ending up with huge stocks and factory overheads. But these companies do not outsource each and everything. They are very careful to keep those parts and knowledge that are critical to the companies themselves. They are kept in-house and are essential for their survival. For example, for Nike, the sole of the shoes is still designed in the United States.
Slowly, organisations are moving towards the concept of virtual organisation. They use networks to link people, assets and ideas and create and distribute products and services without being limited by ownership of fixed assets and incurring fixed overheads. These cut costs dramatically. A virtual organisation scores over real organizations and are virtually unbeatable as it carries little fixed overheads. This is why offshore outsourcing is becoming very popular day by day. Though it may not necessarily lower the overall costs but it certainly lowers the fixed overheads of the company and gives more flexibility to change with the requirements and trend of the market.
India is now a leading country for outsourcing especially in Information Technology (IT) sector. Many big offshore companies do their job through outsource, the work are software, web design, logo design, Flash design, search engine optimization services etc.
Finally it can be said that outsourcing is not the one-stop solution for all matters. It has to be managed properly to ensure that there are no costs over-run. However, if properly managed, outsourcing is indeed a better way to reduce fixed overheads and increase business.
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