7. Why Should I Insource?

Why should I insource? No company can survive if they don’t have at least one area in which they are better than the competition.
Now when we look at it from a portfolio of different tasks, we have to determine what should we do in house because we have an advantage. And if we do more things in house we create more value. That value is paid for by consumers. So if we create more value, we make more money. There also is the possibility that a process done in house will improve over time. So maybe in the beginning we’re not very good at doing something, in house, but we become better. And potentially we can become very competitive compared to other companies. Nevertheless, there are risks and benefits of insourcing and they must be weighed against each other. Let’s say that you have a non-essential task that typically you would outsource. So you are sending that work to a supplier who will charge you what it cost them to perform the task, plus a profit margin. Now if you did that work in house all the cost you would incur was your own cost. And your own cost might be less than what the supplier charges you while making a profit. You could negotiate a lower profit for the supplier, but they may say no. So you have to be very careful in how you look at these decisions. No matter what the company, everyone has the potential to take an in house process and make it better. For example, you can hire experts who know how such a process should be performed and they improve your process. They can be in house talent, or they can be consultants. Or you can just invest in that process, buy better technology and it becomes more efficient. And finally, if you are in a merger situations where two companies are coming together, you can take the best parts of each company and then improve your performance that way. But there are also two major risk categories that apply to insource processes. The first category is that the insource process may be much inferior to what an outsource process would have. For example, you may have higher cost, lower quality, less flexibility and worse service overall. The other major risk category is that administratively an insource process is very inefficient to manage. When it comes to an outsource process, it’s a simple contract. If they don’t perform as expected you always have the option to fire them and go somewhere else. If you have an insource process it is a lot harder to get that accomplished. So you have to weigh the benefits of the insource process against the risks that occur with it. And pick the processes that lend themselves to insourcing and also pick the processes that lend themselves to outsourcing.

Jim Rohn Sứ mệnh khởi nghiệp