Now Is the Time to Review Outsourcing Opportunities
Given the tough economic times and sales levels that are most likely below plan, most B-to-B catalog managers are looking to reduce overhead costs without affecting revenue-driving activities. Much of the “low-hanging fruit” has been had when it comes to cost savings, and I submit that now is the time that many of you must face “significant structural change” as an option. Inevitably, your discussions will lead you to consider outsourcing noncore functions in your company.
The first question you might be asking is, “What’s a noncore function?” The answer varies for every company, but generally, I consider noncore functions to be anything that doesn’t directly touch a customer. Common examples include building management, HR, IT, accounting and training.
Increasingly, however, smart catalogers are moving closer to the “virtual corporation” model where even customer-touch functions are being outsourced. Functions like inbound and outbound call centers, fulfillment services, warehousing, Web site management, catalog production, and circulation planning are now all on the table to be considered. When entering the “make vs. buy” discussion, start with the following three premises.
1. The outsource vendor can perform the function better at a lower cost. This is only logical if it focuses on one function and does it on behalf of several like-minded catalog companies. Lower cost is easy to define; better takes a little more analysis.
2. That you’ll maintain or increase the level of functional knowledge and quality control when you outsource.
3. There are significant savings to be had through outsourcing.
Gone are the days when you can say, “Nobody can do this as well as we can.” In the last 10 years, many specialized vendors have invested in the people, software and transactional volume to do it better than any one catalog company alone. Developing your own fulfillment software would be a good example of this.