Outsourcing Vs Vertical Integration
What are your business’ core competencies? What would you consider is your own personal forte?
Now, think about the tasks at which your business does not excel, and think also about the things that you personally do not do well.
There is a high likelihood that someone out there is very good at the things at which you are not so good, and there are companies out there that specialize in the tasks at which your business does not excel.
Think about something for a minute:
Is it better to focus on your core competencies or to try to excel at everything that your business needs?
Frankly, there is no correct answer to that question. The best answer that I can give is, “It depends.”
It depends on what else your business needs. It depends on who else is on your team and what their skills are. It depends on your ability to acquire and retain great talent. It depends on whether or not you want to — or have the resources to — invest in the many areas that a growing, successful business needs.
I recently met a consultant that offers CFO-on-demand services. Having spent a sizable portion of his career in the world of corporate finance and as a CFO himself, he has the expertise to help a small business to grow their revenue stream by identifying opportunities to free up cash flow and to place that cash in the right places.
Can a bookkeeper provide the same ROI as a CFO on demand? Probably not. Should you hire a full-time CFO to do the same thing that this consultant can do? It’s your decision to make on whether or not you need to invest in the overhead for a permanent position.
I recently met a manager for a marketing firm that has launched a new product for small businesses. Should you hire a marketing manager for your business instead of purchasing the products and services that this marketing firm offers? Once again, that is for only you to decide.
In both of these cases, one of the downsides to just hiring a full-time member of your team is that you now need to know enough about that side of the business to know if they are successful at what they do and if your investment was worth it.
If you were to outsource the finance and marketing sides of your business, you would be hiring specialists in those fields alone, and part of what you pay them to do is deliver the results that you expect.
Amazon recently parted ways with FedEx and UPS, for much of their business. They are now operating their own long-distance freight operations, outsourcing only the “final mile” portion of the delivery using contractors in trucks that Amazon leases to them. This is an excellent example of a large corporation with the resources to vertically integrate their business. Their core competency is not freight management, but by acquiring the assets needed to manage their own freight, their vertical integration has now added that skill to their list of competencies.
Do you or your business have extensive knowledge in Human Resources, corporate finance, warehousing, production management, environmental health and safety, physical logistics, transportation, supply chain planning, Customs compliance, and more?
A small business might not have the resources to fully integrate everything that they need to be successful. Outsourcing certain facets of your business not only makes good business sense, but it may also be a necessity.
If you are considering to hire a supply chain manager or logistics manager, or if you currently have a logistics team but are unsure of how successful they are, Titanium Consulting, LLC can conduct an analysis of your supply chain operation to assess its health and level of success.
We can also conduct a full, end-to-end analysis of your supply chain to identify opportunities to improve efficiency and increase your cashflow. We also solve problems, improve existing processes, and implement new processes where they are needed.
We are partnered with many other teams that can provide support in a number of different areas, helping you to focus on your core competencies while the specialists do what they do best.
Contact us today to schedule your free initial consultation and so that we can work together to set your business apart from your competitors.
Brad Couvillon, CPIM, CSCP
Lean Six Sigma Black Belt
Founder, Titanium Consulting, LLC