How outsourcing cuts operational costs

Keeping any business running requires a host of operational activities, often unrelated to the company’s core competences. These require staff, equipment and supplies – which incur operational costs.

By outsourcing these activities to a specialist third party, you can sidestep many of these costs. Meanwhile, you could also achieve enhanced value through your supplier’s niche expertise, technological investment and best practice approach.

Offloading unnecessary costs

To run smoothly, companies across all sectors need essential services such as cleaning, catering, HR processes, IT support, payroll administration – the list goes on. These activities may be entirely unrelated to their core business, but they are essential and increase the company’s cost base.

As well as the paid hours and the cost of any essential equipment or supplies, these operational tasks may also incur invisible costs by distracting staff from the company’s mission-critical activities. However, outsourcing these operational activities can offset some of these costs.

Securing better value

Offloading operational activities to a third party allows you to achieve the same outcomes (i.e. a clean office, stable IT infrastructure or effective payroll administration) with a significantly lower outlay. Here are four ways outsourcing operational activities can achieve better value for your business:

Lower capital investment – When you carry out an activity in-house, you have the pay for the resource, equipment, power and consumables (etc.) required to get the job done. However, when you appoint a specialist to carry out the task on your behalf, you can achieve the same outcome without this upfront investment.

Economies of scale – An activity that seems peripheral to your business will be a third party’s core business. So, they will be performing the same activities for several customers. As a result, their costs will be spread much more widely, keeping the price for each individual customer down – allowing you to achieve the same outcome for less.

Allows you to shed resource – Outsourcing activities to a third party could deem some of your own resources, equipment or infrastructure redundant – allowing you to release these costs. For instance, personnel previously tied up in operational activities may be unnecessary. In turn, your leaner workforce may allow you to downsize your premises, reducing rental costs. Meanwhile, any surplus tools or technology can be sold to recoup costs.

Increased effectiveness – Just like you strive to stay ahead in your core market through research, training and networking, any reputable third party you appoint will be doing the same within their discipline. As a result, you can piggyback on their knowledge and R&D investment. You’ll gain access to cutting-edge tools, best practice processes and knowledgeable experts. All of these drive improved effectiveness, giving you even better value compared to going through the motions yourself.

Preserving quality

Of course, value will only be achieved if the supplier is credible. Your objective is to cut costs, not to lower standards. So gauging quality is essential. To ensure your standards are maintained, carry out all necessary due diligence to verify the credentials of the provider and confirm the necessary capabilities are in place to serve your firm’s needs.

Conclusions

Regardless of their sector, businesses require a host of operational activities to operate smoothly – or at all. By outsourcing these tasks, you can immediately cut the overheads of hiring your own staff, maintaining equipment and replenishing consumables.

On top of these savings, piggy-backing on your provider’s economies of scale, subject matter expertise and up-to-date infrastructure can achieve greater overall value for your business.

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