The basic reason cited for outsourcing is most often to reduce costs. However the Customs Broker chooses to spend those savings, whether they are passed along to its customers in the form of lower brokerage fees, reinvested into other areas of its operations, or returned to its owners and shareholders, the need for every organization to continually drive down its costs is constant. According to an IBM survey, 50 percent of executives state that reducing costs is the top reason for outsourcing. In most cases, the cost savings are in the 40 to 60 percent range, but can be much higher depending on how large the gap is between the company’s current cost of operations and the money it will be paying the outside provider.
Although cost savings is an important reason for outsourcing, it is actually only the primary reason for about half of the outsourcing projects companies undertake. This means that the top reason for outsourcing for the other half of the projects is, in fact, something other than cost savings. The second most frequently cited reason for outsourcing is the ability to focus more company resources - its people, its physical and intellectual resources, and its capital - on the activities that provide its unique competitive advantage; thereby improving the company’s ability to leverage its most valuable capabilities and move ahead of it’s competition.
The third most frequently cited reason is to achieve a more variable cost structure. Through outsourcing, instead of having relatively fixed investments in its internal operations, the Customs Broker shifts to a more on-demand business model. This reduces the effective cost of operations by enabling the company to adjust expenses in response to changes in the marketplace. Portway clients pay on a per transaction basis. Therefore our clients eliminate the need to hire summer help and the requirement to staff 24/7 is all but eliminated.
In addition as brokerage volumes can be seasonal, our clients are never in a position where they are short of people or have to many people on their payrolls waiting for the next “up cycle” in volumes. Finally, Portway clients never find themselves faced with having to lay people off in slower economic times only to scramble to fill the seats when the economy picks up.
Access to skills not available to the organization internally is next most frequently cited value from outsourcing. After all, few organizations, regardless of their size, can hire all of the talent they need or would like to have. Because Portway is specialized in Canadian Customs Brokerage and Logistics and is serving many clients, we have a much deeper talent pool upon which to draw.
Measurable improvements in quality can result as well. Areas of the business that don’t produce unique competitive advantages are often the last to be funded and invested in, making continuous improvements in quality difficult to achieve.
Most recently, companies have begun to find that bringing in outside specialists spurs much needed innovation in their operations. Some have equated outsourcing to having a dedicated R&D department; as the provider innovates new solutions they can be immediately put into practice in the company’s own operations. Portway for example is investing in technological ways to deal with missing information on import documentation that a sole Customs Broker would find cost prohibitive.
Benefits of Outsourcing Data Entry
Portway seeks data entry efficiencies because data entry is our business - it’s what we do. When we stop processing a file “midstream” in order to revert back to the broker it adds to our costs which leads to margin erosion and potential price increases to our clients. As the cornerstone to our value proposition is cost reduction, we want to be in a position to table the lowest price possible at all times.
A final, and often-overlooked benefit, is the ability through outsourcing to free an executive’s time to focus outwardly on strategy and customers as opposed to inwardly on current operational issues. For many executives, dealing with the day-to-day details of operational activities robs them of time that would be better spent on customers, shareholders, investors, and suppliers.
About Portway
Portway International help’s companies reduce operating costs and address capacity issues within the context of today’s challenging labor market. Portway provides off-shore services to the Logistics and Customs Brokerage industries. Our experienced team of professionals engage with our clients to migrate their business processes to Portway’s office in Delhi India. Our goal is simple; to reduce our clients’ operating costs and in turn provide them with innovative ways to manage their businesses.
For more information on how the principals outlined in this document can benefit your company, please do not hesitate to call us at 905.486.0196.