There are four types of outsourcing services: professional, manufacturing, process specific, and operational. Each has benefits and risks, with cost savings being the biggest benefit. Professional outsourcing is the most common, while manufacturing outsourcing is specific to the industry. Other outsourcing services may be specific to a unique process or internal procedure, while operational outsourcing is more common in manufacturing.
There are four types of outsourcing services: professional, manufacturing, process specific, and operational. Each of these services has grown in popularity as more companies look to reduce overhead costs while maintaining the same level of production or support. There are risks and benefits of outsourcing that need to be considered when looking at different types of outsourcing services. The biggest benefit is usually cost savings, as the company saves on both equipment and labor costs. The greatest risks are related to quality and control.
Professional outsourcing services include accounting, legal, purchasing, IT support and other specialized services. This is the most common area for these types of services, due to the potential cost savings associated with this type of arrangement. The company has access to high quality resources while paying only for the services actually provided. This substantially reduces the overhead costs of the organization.
Manufacturer outsourcing services are usually quite specific to the industry. For example, an automotive manufacturer may have an outsourcing agreement for the creation and installation of windows in all of their models. This arrangement will have huge implications for operations but can result in significant savings and reduced assembly times. The main risks with this type of arrangement are related to production line disruption and quality issues.
Other outsourcing services may be specific to a unique process or internal procedure. In many cases, it is cheaper to have different parts or components manufactured by other companies. This simplifies the assembly process, reducing the cost and total time required to create a complete unit.
This type of outsourcing is also found in other industries. In the service industry, it is quite common to outsource specific aspects of the operation to other companies that specialize in that service. For example, a bakery may outsource the delivery of the final product to a courier company. This contract may provide details of customer delivery times, contacts and costs. This type of business arrangement allows each company to focus on its strength and improves customer service.
Outsourcing services for operational activities are more common in manufacturing than in other industries. The nature of manufacturing creates opportunities for very specific operational activities to be delegated to outside companies. Machine maintenance and equipment repair can be obtained from outsourcing services that specialize in the specific equipment. Other types of operating activities include cleaning, landscaping, facility maintenance, and property management.
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