Another view of outsourcing

Currently, there is still lot of people not accepting outsourcing because it is not cost effective. Usually, the initial cost is significantly high and superficially it is higher than being performed by internal resources. When I started working in a MNC, I resisted the concept of outsourcing because the would-be result was obvious. The supplier used the same number of staff/worker to perform the same task and they charged the company the actual cost plus a certain margin. Why did we need to waste the money in this way? The foreigner of the management did not understand the situation of China. They did not realize that the cost of labor in China is extremely low. We were under keen competition and the cost needed to be as low as possible! Above all, the 3PL did not know our business nor our culture.

However, since I was just a small potato (though my title was Financial Controller), obedience is one of my “talent”. I followed through and worked closely with the Third Party Logistics (3PL). At the same time, I always upheld the principles of “trust no one” and felt the need to set up the mechanism of check-and-balance. Occasionally, I found that outsourcing is an effective tool of check-and-balance. Over years, I saw many managers like to mother their staff, no matter what kind of mistakes they made, they would help defense and resist to any criticism as they felt humiliated if his department is blame for anything. Eventually, conflict between departments arose. Sometimes we are too human to tolerate mistakes, particularly it was made by those having devoted long time to work. It is commonly found in many Chinese companies where staff performance is judged by time but not result. I believe that it is easy for you to find some example in your environment. However, when a 3PL is doing the job, it is normal for our internal staff to request a tight standard towards it. Though there may be some argument, the ultimate result is to benefit the company. By all means, how to move to outsourcing is critical, I may spend another blog on it.

In addition, it is common for a company to have more than one site to operate, one in south and the other in north over China. If the talent/regional manager can stay at a site for long time that is fine (sometimes it may not be the case). Otherwise, I would prefer trusting a company to an individual. Of course, I am outsourcing the non-core competence activities not the core. Imagine a situation like that, our internal staff challenge the 3PL in the daily operation and 3PL defense and improve the service quality to meet the customer’s requirement. The manager that manages the 3PL performance should be able to distinguish reasonable allegation. It is another version of management by conflict! On the other hand, if outsourcing is the strategy, and we are going to change the 3PL due to unreasonable internal complain, you may guess who will resist. Right, the internal staff. Why? It is because they need to start all over the set up work and it is time-consuming. Interestingly, they may help the 3PL to improve the quality of work. This kind of outcome may be too ideal, it depends on how the manager to mange.