There are four types of outsourcing services: professional, manufacturing, process-specific and operational. Each of these services have grown in popularity as more businesses look to reduce their overhead costs while maintaining the same level of output or support. There are risks and benefits to outsourcing that must be considered when looking at different types of outsourcing services. The greatest benefit typically is cost reduction, because the company saves in both equipment and labor costs. The largest risks are related to quality and control.
Professional outsourcing services include accounting, legal, purchasing, information technology support and other specialized services. This is the most common area for these types of services, because of the potential cost savings associated with this type of arrangement. The business has access to high quality resources while paying only for services actually provided. This substantially reduces the organization's overhead costs.
Manufacturer outsourcing services usually are quite industry-specific. For example, an automobile manufacturer can have an outsourcing arrangement for the creation and installation of windows in all of their models. This arrangement will have huge implications on the operations but can result in significant cost savings and reduced assembly time. The primary risks with this type of arrangement are related to interruption of the production line and quality issues.
Other outsourcing services can be specific to a unique process or internal procedure. In many cases, it is more cost-effective to have different parts or components manufactured by other companies. This simplifies the assembly process, reducing costs and the total amount of time required to create a complete unit.
This type of outsourcing also is 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 can outsource the delivery of the final product to a courier company. This contract can provide details on delivery time lines, customer contacts and costs. This type of business arrangement allows each company to focus on its respective strength and improves customer service.
Outsourcing services for operational activities are more common in the manufacturing sector 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 operational activities include cleaning, landscaping, facilities maintenance and property management.
