Outsourcing for Success Aristotle Onassis, one of the greatest shipping magnets in the world, once said, The secret of business is to know something that nobody else knows. Well fellow members of the Canadian Management Association, the secret is out. My name is John Tasker, president of the Great North Company, one of Canada s leading competitors in department store chains. This afternoon, I am going to reinforce one of the most valuable business techniques currently of popular controversy. Despite facing frequent criticism for disloyalty to corporate identity and domestic business markets, outsourcing is the new yellow- brick- road to successful business performance. As some of you may have heard in the past couple months, the Great North Company, or GNC as we stakeholders like to reference it, faced some significant financial troubles. The company decided it was in its best interest to close selected locations across Canada. It became apparent to many of my colleagues and I that GNC was in serious need of an internal makeover. But what, we questioned, could we possibly change? In came the suggestion of outsourcing. GNC realized by attributing some of its internal corporate functions to outside companies, GNC could focus more energy on key aptitudes and lessen the stress on internal management of operations. The impact of domestically and internationally outsourcing some of GNC s minor corporate tasks such as customer service, packaging, telecommunications, and shipping, was instantly noticeable.
The road to outsourcing was simple. GNC broke down its key functions into primary and secondary standings. Primary tasks included store location management, corporate planning, product design and designer relations. These are all things GNC believed were integral to corporate operations and maintaining the company s identity. Secondary tasks for outsourcing included shipping and receiving, public relations management, packaging, and customer service now hosted by UPS, Strategic Objectives, Vulsay Industries Limited, and Conectys Group respectively. Outsourcing these procedures lessened the stress on internal corporate procedures. The benefits of restructuring GNC on the premise of utilizing outsourcing have been continuous. GNC has witnessed a 75 per cent increase in productivity in the last month, and sales have increased by 80 per cent. Only a few months ago the company was closing department store locations. Now GNC is thriving against other market competitors. With less stress on internal operations, GNC is able to focus on corporate goals, manage financially risky situations and plan ahead for future endeavours. With outsourcing, the company pays only for the services it needs when it needs them, preventing excessive amounts of corporate spending. By utilizing the services of other companies, we have alleviated high tax costs, high energy costs and the cost of government- required labour benefits. For those of you who may still be cynical of the outsourcing process, I ask you to please reconsider, not for my benefit but your own. If time has told me anything about the business world, it s that outsourcing is a global reality. Companies left, right and center are starting to realize the benefits of utilizing the
services of various industries world wide. Currently 36 per cent of Canadian businesses outsource or offshore company services. Twenty- six per cent of CFOs favour India for outsourcing, while 18 per cent favour China. The top five outsourced sectors include manufacturing, IT services, research and development, distribution and customer service. The top five outsourcing locations include India, Indonesia, China, Bulgaria, and the Philippines. Globalization is the name of the game. To be competitive, corporations need to adapt to this new world order. Now do not take me for a naive businessman just yet. With every corporate structure come risks, and outsourcing has a few of its own. One of the more dubious areas of outsourcing technique is trust. Often people question the role of confidentiality. In entering a contract with another business inside and outside of Canada, companies will have to share private, valuable information. The way to overcome this is to know whom you are entering a contract with. Do your research. Meet with the company s leaders. Ask for help. When looking for partners to establish outsourcing contracts, GNC utilized a company called Accenture to find reliable candidates. Accenture currently has over 21 different outsourcing sectors in which it assists companies. Another concern around outsourcing is its level of control. Often stakeholders fear that employing another company to maintain a sector of their business allows room for error to go overlooked. There is a sense of disconnect between management and end production, which calls for increased inspection and feedback of production processes or service provisions. The solution to this situation is simple thanks to recent advances in available technology. As an example,
GNC currently employs consistent instant messaging, direct online video messaging, issue tracking technology, electronic time management services, and various cost assessment tools. Thanks to these unique software GNC is able to stay in direct contact with its contracted companies and is always aware of impacts on the cost of production and service execution. Many critics of outsourcing often question the effect of using services employing people of different ethnic origin for a company s customer service. Surveys show customers may report lower quality service when someone of non English- speaking origin takes their calls. Ultimately, this is a cultural implication that is hard to overcome. However, the purpose of outsourcing customer service to international call centers has its many benefits. This process limits the need to hire and train specialized service staff and therefore reduces operating costs. International call centers have also helped urbanize underdeveloped countries and are thus contributing to the globalization system. With a world becoming ever more culturally diverse, it is a good idea to begin incorporating various cultures into business operations. GNC now outsources most of its customer service to a multilingual outsourcing company called Conectys Group, which services customers in more than 35 different languages. We at GNC feel confident that our customers are being well served no matter what their background is. Thanks to outsourcing techniques, the Great North Company has seen an amazing turn around from where it was just a few months ago. As a department store chain that has existed for over 50 years it was hard to picture making significant changes in how the company was run. But if I haven t said this clear
enough let me say it again. Adaption is the key to succeeding in a highly competitive market. As the famous success- literature writer Napoleon Hill once said, The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those which fail. With the induction of outsourcing, GNC can now focus on its core corporate activities. Small internal operations are no longer eating up useful resources. GNC has now introduced cost saving techniques that impact the overall financial performance of the company compared to earlier years. Previously GNC was operating at too large of an expanse without enough control over its internal spending. Today the company allocates money to services on a priority basis. With the outsourcing of smaller functions, GNC also has the physical space needed to effectively conduct its business. Overcrowding is often a large contributor to stress, miscommunication, and poor internal management practices. With a smaller, communicative team to work with, the standardization of corporate practice is a lot easier. I hope at this point you have considered the impact outsourcing may have on your own company. In a world where the market is growing evermore competitive, it takes the right tools and techniques to survive. Even if outsourcing is just a temporary tool you utilize to bring organization to your company s operations, the benefits are there. If ever doubt falls upon you just think of GNC s Cinderella story. Any company can go from zero to hero with the help of a little restructuring technique. Thank you for your time today, and all the best in your business endeavours!