Top Five Mistakes People Make While Outsourcing

By Author: petertodd
Total Articles: 3
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The recent recession made companies think twice about how they were doing business and most of these involved budget cuts. Outsourcing became more attractive as it is cheaper, it does not involve employer/employee taxes, and most are contractual. What resulted was a drastic drop in operations expenses was seen as a light at the end of the tunnel for companies operating near or in the red. However, outsourcing has many pitfalls and companies are just beginning to see some major mistakes that they could or could not correct.

Lack of documentation is the first mistake commonly made. When companies outsource, they mistakenly think that these manufacturers would be innovative and concerned about their products. However, more and more companies are realizing that the manufacturers are not innovative enough and neither are they concerned with the documentation of it as long as they could produce the numbers. Most of the time the quality of the products experience a steady decline and this could upset the major companies for they could not see how they are going to correct these. The growth of the major company is not the focus ...
... of the provider.

Lack of monitoring is another major mistake. Some major companies place their trust on the providers that wish to win a contract by bidding the low. This will tempt the companies into awarding the contracts, but at what cost? Most of the providers cannot keep up with their promises resulting to disappointing products and productivity. Most of the time, the companies not only get disappointed with the results, but they will be left with the task of untangling the mess created.

The third mistake that could be done in outsourcing is bringing down the prices. Some major companies think that they could reduce their costs by spreading their contracts thin to more providers at a fraction compared to outsourcing to just one or two. Unfortunately, this can result to unstable or lower productivity. Providers who win the contracts don't work together, instead, they only work on their own contracts, and some providers may not be able to produce at all.

The fourth mistake is a lack of maintenance on the contract. Because of the instability of the market forces, long term contracts are not very popular and some just give short term contracts of six months to a year. This does not make it profitable for the providers who like to have long term contracts. A yearly renewal of the contract may sound nice on paper, but it is unstable.

The fifth mistake is the honeymoon effect. Providers will always present a ‘best foot forward' in order to win a contract. Upon winning it however, some providers start to slip on their quality control.

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