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5 Critical Success Factors in Outsourcing

Key Takeaways Outsourcing helps reduce cost and improve productivity and efficiency when done right. There are several success factors in outsourcing and they include setting a strong set of KPIs and managing them. You will also need to partner with financially stable outsourcing companies with a competent workforce that's using the right technologies. The outsourcing market is progressing in lightning speed. The business process outsourcing (BPO) industry has grown beyond call centres, churning billions of dollars in a year. A lot of industries are outsourcing their processes, especially customer service tasks. All businesses are different, and hence, their needs vary. Here are a few examples: Telecom companies outsource their customer handling tasks and backend processes Banks outsource a part of their mortgage requests Insurance firms outsource their claim handling processes Multinational companies outsource payroll processes and more. The beauty of outsourcing is that your customers or clients can tell that the company they are dealing with aren't the same handling their queries, claims, phone-connections, mortgages, payroll, and offering solutions. And, of course, why should they? Outsourcing is an important management approach to reduce costs, streamline workflows, and increases the company's efficiency and productivity.   Studies have revealed that if companies outsource some of their extraneous processes to third-party service providers, they can save between 40% and 70% on their standardized business processes. Contrary to popular beliefs, the cost reduction is not because they are outsourcing to low-wage countries, but because BPO companies tend to work at a higher efficiency rate than the in-house team. BPO companies recruit highly experienced and dedicated staff members who are trained in specific areas required by their clients.   If you are considering outsourcing as an option, you should look at these key areas. 1. Setting relevant and strong KPIs If you want to outsource your business processes successfully, then you must first define a set of KPIs. Primarily, KPI is a metric that measures the performance of a company and determines how well the firm is meeting its goal. Setting your KPIs includes creating a simple dashboard where you can regularly monitor the effects of BPO on your cost and revenue structure. As a business owner, you should always choose KPIs that are aligned with your strategy and have clear connections to the overall performance of your business. One of the most important things to consider while setting KPIs is that don't have too many metrics as they can be harmful to your business. On average, businesses should implement less than five KPIs. 2. Researching BPO companies thoroughly Before you sign the contract with any BPO partner, it's essential to research your options and market. You must look for references, if possible. The major factor you need to consider while outsourcing is the growth. You must examine how well the BPO is performing so that you can get an idea if you're going to contract to a suitable partner or not. Visit the vendor before partnering, so that you can get to know about their work culture and compare it to yours. If not, there are other service providers. 3. Finding a partner with the right workforce A right workforce is a key to the long-term success of a business. Therefore, you must check with your service partner whether it has the right talent in its firm or not. A team is the backbone of the company, and a weak team has the power to take your business to a low. And we all know how much dedication and hard work is required to start a business. So, before partnering, you must ensure that your vendor has the required talent in their firm. 4. Use of latest and best technologies BPO companies that make use of the latest and advanced technologies can serve you better, is efficient, more open to new markets, and can contribute to the development of new product or service. It can also help you gain intelligent insights on business and marketing, giving you the highest chance of beating the competition. Along with a talented workforce, this success factor will help your business withstand any downturn. 5. Partnering with a financially sound BPO partner Until your partner is financially sound, he won't be able to help you. Therefore, it's essential to look for BPO companies  who are financially stable and secure. In event of a bankruptcy, the company can survive with the help of other organizations and can come out of the situation quickly.    

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A Wake Up call for Australian Manufacturing

Everyone knows that manufacturing in low cost countries has become very popular all over the world, and Australia is not an exception. But what is the reason behind choosing low cost countries versus domestic manufacturing? Is relatively lower cost the only factor behind it? Here are some of the most prominent reasons why low cost countries are preferred over domestic Australian manufacturing and some tips on how you can get back on track to compete with those LCC countries and win.  Manufacturers in Australia, what is your real product? No.. I don't mean the widget you make and sell to your customers. What is the key ingredient that your customers are willing to pay the extra premium to get an item that is not made in an LCC (low cost country) such as China (albeit not so low cost these days). As a procurement professional or business owner, why should I consider your factory above the offshore options? Aussie Made is going to be the best! So bring on the chorus of "It's Aussie made so it HAS to be better than cheap Chinese crap" - the good, well-worn rebuttal to offshoring manufacture. Unfortunately, this does not hold true these days. Sure, in early days when the LCC factory was doing the manufacturing equivalent of "whittling" your product out of crude materials with crude tools it was easy to say "We have the history and the experience that offshore manufacturers do not, that is why you need to buy from us!" But over 2 decades of every first world country outsourcing their manufacture to an LCC to get costs down has given the foreign competition all the funding and incentive needed to improve and innovate. To bring about reliable and reproducible solutions to manufacturing issues and to put these in play so the days of cheap and nasty have disappeared. We have now become the low tech solution to manufacturing in many cases. In some industries, the LCC solution is now so technologically advanced that any hope of returning the industry to Australia has vanished and faces not only cost implications but a lack of trained staff and modern equipment to facilitate the return. I recently worked for a company that manufactured the same product in Australia and China. Same parts used from same suppliers in both cases. Both factories were given the same instructions for manufacture. As a trial I brought 2 completed products in a container of parts from China to do a comparison. I asked several staff to select the product from China and the product from Australia in a blind test. Virtually, everyone chose incorrectly. The product from our Chinese supplier was cleaner, better finished and it was apparent that an extra level of care was taken when compared to their Australian counterparts. Considering the language barrier and the fact that instructions for manufacture were provided in English, it was indeed concerning that the native English speaking suppliers did not stack up as expected on quality. It's easier to communicate with an Aussie company and we keep our word! Unfortunately, once again, not entirely true. Sure, it may be easier to pick up the phone and talk to an Aussie Manufacturer or even to have a long rant over a missed delivery and feel that your rant is being understood (at least) but does this translate into something real and tangible from a customer point of view? Not unless it results in action. I have personally found and heard similar recounts from clients that responsiveness is lacking for a lot of Australian companies. We send an order.. no acknowledgement. Then we have to follow up with a phone call. Hopefully this results in at least a verbal acknowledgement of the order but, to be perfectly honest, this is an extra step and extra degree of micromanagement we need to employ to use a local factory at a higher premium. Where is the value add here? When you receive an order, send through an acknowledgement ASAP, I assure you your LCC counterparts are doing this as a matter of process. If you do not use a system that generates an acknowledgement and ETA, then do so manually. As customers we need to know that You have the order and    When we can expect delivery. We need to know these quickly as we often have customers that need to purchase the goods or we are using them in manufacture of other products. Late delivery and wishful promises (based on a verbal confirmation/last delivery lead time) lead to frustrated and dissatisfied customers for us, which dramatically impacts the prospect of future orders.  Late delivery to a manufacturing line results in a stock out and stop-start situation which adds cost to our products and basically pisses us off. Giving an ETA is not enough. You need to meet it! As your customer, we are planning around your quoted ETA. If you are late, this causes undue stress. As one factory owner once advised on how they stay in business: "We always underpromise and overdeliver! That way if we are on time, it is no problem and if we are early, the customer is happy." I had one supplier in particular who would receive a PO, not respond, I would call and get no answer or a message from the receptionist that the PM was busy and would call back (never did). It would take 5-6 attempts to get an ETA. A few days prior to this date we would call to check status and usually it would be 1-2 weeks after the date. Not exactly a way to foster trust or build your brand. We are the victims here.. You all decided to go for the cheaper option! No one is innocent, so please stop playing the victim card. We all contributed to the use of LCC sourcing and manufacture and continue to do so. We were all very outspoken and critical when Pacific Brands decided to offshore their manufacture, but how many of the critics were happily walking into BigW/Kmart for low price kids clothes and underwear? By choosing the low cost alternative we created the situation where Aussie companies had no choice but to pursue low cost options to compete with the cheap culture we fostered. Almost every industry has been similarly affected. Next time you want to play innocent victim, consider how your past buying habits may have contributed to the downfall of an Aussie industry. We are all guilty and we can't expect to trade on the innocent victim card. Move on and find a way to actually outperform your LCC competitors. Protectionism and sympathy is in abundance on social media but when it come to the purchasing dollar and value for money, sympathetic choices rarely come into the equation (unless it is charitable purposes for helping the impoverished or 3rd world). Only you can make your company/service in demand I used to repair TVs (years ago in a previous life). As a community, we all decided to pursue cheap electronics to get bigger, better features at the expense of longevity. We became a throw away society and the industry in which I was employed and trained was also something we threw away. Maybe this gives me a long term perspective on the problem. I was one of the first to succumb to low cost imports before we all decided it is a bit of a problem. I moved on, retrained, managed a CEM (contract electronic manufacture) factory for several years until that industry also succumbed. So I learnt that you need to keep ahead of the competition in an ever changing global economy. As a consultant, many of my clients did not perceive cost savings as a driving factor to transitioning to an LCC vendor. The predominant considerations were reliability, consistency and scalability. Several went to LCC because they had been knocked back by several factories in Australia as their product did not exactly match the current offering (despite being willing to pay costs to modify and trial new tooling) or their order quantity was too low or too high. So how do you compete? Become more reliable. Make your word your bond and stick to delivery dates like your life depends on it. Be flexible and adaptable to your customer's needs. Respond quickly to Orders/RFQs and ensure your customer does not need to "chase" you for an acknowledgement/delivery. Finally get the huge LCC chip off your shoulder and don't try to play victim. Aussie manufacturers if you can make your word and level of service your product (regardless of the widget you may be contracted to manufacture), maybe we can stem the tide of industry collapses and return to a point where we can confidently say: "It's AUSSIE made, we go the extra mile and make sure you are going to be happy!"

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Benefits of Outsourcing and the Other Side of It

No matter the functions of your small business, you need people working with and for you in order to get things done and keep the business running. Outsourcing work has become one of the most popular ways to find those people and get all the advantages. But with the benefits of outsourcing there also come some disadvantages. Find out if outsourcing services will work for your business by reading below. Sometimes, it can be best for your business to let others do certain tasks for you. These can come in the form of freelancers or companies. Either way, there are clear benefits to outsourcing work. Here are some of the benefits of outsourcing for your business: 1. You’ll get access to specialists There may be things that your business may need that aren’t part of your expertise. These can be technical in nature such as building your website or mobile app. They can be for your customer service needs. Whatever it is, outsourcing work will give you access to experts in the field of your particular need.  2. These specialists can get the job done faster and better A team of specialists will work faster and more efficiently saving you time and money in the long term. Because whatever you need to be done will fall under their expertise, they will also tend to do a better job at it too.  3. Saves you the hassle of recruitment This is particularly useful for projects where hiring full-time staff to do the work would be both impractical and uneconomical. Also, finding experienced people to do certain tasks you could otherwise outsource can prove difficult and costly. For short term projects, it will be better to skip all of that hassle and send your work to an external company that already has this pool of experts on hand. 4. You’ll get to focus on the core of your business Outsourcing work allows you to concentrate on what matters most in your small business. As a business owner, you’ll know the effort required to maintain and keep your business running.  5. Outsourcing cost savings Outsourcing work lets you cut down costs in multiple fronts. You won’t need to pay their monthly wages and associated bonuses, you won’t have to pay for employee insurance if your country requires it and you won’t have to invest on specialised machinery that may be required to do the job at hand. Outsourcing work will also let you tap into the global market of specialists.  Because the daily wages of employees will vary from country to country, you can opt to hire experts at a fraction of the cost of hiring a local without sacrificing quality.      6. It can fill gaps on your own manpower Even larger enterprises with multiple departments may find it difficult in bridging all of the gaps in their business needs. For small to medium enterprises, sometimes sending off even some of your business processes such as accounting, inventory management and customer support can go a long way in improving your profits. Before you make up your mind on outsourcing work or not, you’ll also need to know the disadvantages of going this route. It can be difficult to communicate your specific needs to someone working remotely Sometimes your needs may be so specific that it’ll need your direct supervision in order for you to realie your ideal vision. In this case, it might be more worthwhile for you to hire a part-time employee to work on your project.  An example of this was when I hired a firm to write copy for my site. Because of the technical nature of my business, most of the writers of that firm struggled to keep up with the terminologies. Their lack of experience in my particular industry also meant that what they wrote was hit or miss. It was faster (and cheaper) for me to write everything myself. You can’t always be sure of their quality of work While most of these firms and freelancers may specialise on your specific needs, you can’t always be sure that the job that they do will be up to your standards. It’s best to research their current clients and find feedback on their outsourcing services before you push forward with hiring them. Outsourcing your needs to another country may lead to communication problems While outsourcing work to other countries can help you cut costs due to lower wages in that region, it also opens up the possibility of miscommunication due to language barriers. These firms can also be on another time zone, meaning back and forth communications may take time due to the difference in office hours. It really is up to you to decide whether the benefits of outsourcing are for your business. Don’t rush into the outsourcing band wagon unless you are sure that you absolutely need to and if you do, be sure to make sure you fully brief and clearly communicate your requirements while outsourcing work. 

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Getting Real: How to Outsource Like a Winner

You can't manage to do everything at all times, even if you're the most experienced and savvy business owner. Luckily, outsourcing work has become the helping hand of numerous business owners across the world.  If you're asking yourself the questions of how to outsource, when and why, then you're in the right place. Keep on reading. Admitting you can’t do it all alone or just don’t have the skillset for the task at hand is hard for most people but especially for business owners. It can seem like failure or throwing the towel in and that’s why so many business owners think outsourcing work is a dirty phrase. That could not be further from the truth. Recognising that someone else could do a better job or that at least it frees you up to do other things you’re even better at is not failure. It’s empowerment. It’s leadership. It’s good business sense. It’s just plain intelligent. Outsourcing work is a strategic tool that can help improve productivity and boost your business’s profits if you know how and when to take advantage of it. So when do you outsource and how to outsource? That part is both easy and hard. There are some things you shouldn’t outsource, at least not for the time being, such as customer service if you’re a small company because you need to keep that rapport, familiarity and customer knowledge in-house. The best thing to do is put every task through a “profit, length, cost and skills analysis.” Sadly there’s no cool acronym to help you remember this unless you like the phonetic “plocksa”. I’ll stick with PLCS for short. So, the PLCS analysis Profit: is this activity taking time away from my profit generating tasks/is it a core essential to making money? Length: is this a temporary requirement or something that only needs doing periodically? Cost: is it more expensive to do this in-house/is it cheaper on paper but wasting the time of someone who could be generating profits? Skills: is this something we are trained to do/do we have to pay to train someone up to do this/do we have the skills in-house already? Many business functions can be outsourced from accounts, logistics, and training to PR, IT and customer service. When you outsource the right jobs you are free to invest your efforts into activities that will boost your bottom line. There is a balance to be struck, which is why it’s worth taking a little more time to apply PLCS as you wouldn’t want to outsource. However, most companies could benefit from outsourcing IT or PR and marketing. Why waste hours trying to fix computer issues that most managed services could sort out in minutes or would have nipped in the bud before you noticed it? If you value your time as highly as much as you should, the cost of a small dedicated service would be less than you’d lose doing it yourself. Outsourcing pros and cons Effective business outsourcing can positively impact on profits as you have more time to focus on core activities. Sometimes the outsourced work, being done by professionals, can actually be cost neutral or a money maker. Take PR and accounting, for example – the celery of the outsourcing world. Celery is one of those foods you burn more calories eating than it actually contains (so it’s a great weight loss food if you don’t load it up with pulled pork and cheese to take away that bland-kill-me-now-this-is-awful celery taste), and PR can actually help generate more income than the initial outsourcing costs. Good accounting can also be a cost neutral expenditure, too, in the right circumstances. Sometimes you just need to bite the bullet and realise you’re a super business person not a super human and there’s only so much you can realistically do yourself. Think about how much not outsourcing work saves you. Are you confident it’s significantly more than you’d make if you concentrated those efforts on core tasks? Is even just a modest saving worth all the extra hours you’re putting in? Instead of spreading yourself too thin you could be connecting with customers and growing your business. The knock-on implications of biting off more than you can chew starts with hits to your reputation as your quality drops or you aren’t dealing with customers quickly enough. Something as simple as being tardy with a refund can force negative messages into the market. Feelings follow feelings, good or bad, and you want your customers to be talking about you in a good way. Ask yourself “Do I expect others to use my business?” and the answer is, of course you do. You’re clearly good at what you do and expect to be providing services to others who can’t emulate you. You have to live by that too — if someone else can do it faster and better then you should know how to outsource tasks to them and get back to doing what you’re great at and growing your business. Applied properly, with consideration, outsourcing work could completely transform your business. Outsourcing isn’t for failures. Business outsourcing is for winners. Do you outsource some aspects of your business or do everything in-house?

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IP Protection is like playing Poker (mostly)

What I am really trying to say is when it comes to manufacturing offshore there is a lot to be said for the impression you give to the supplier. The analogy here is your IP, this is what both players are actually playing for. Customer for protection of his IP, Regular patron (Supplier) for being able to steal the IP for his own use. The quality of the cards received by the Supplier is representative of how he sees the market value of your IP for his own purposes and how much he is willing to put on the game in order to win. So imagine a some customers in a casino. They walk into the Poker room and there is a table with a dealer and 1 patron (who appears to be a regular to this table). This table only has 2 seats so each customer plays 1 on 1 with the regular patron (who has a sizeable mountain of chips in front of him). Customer 1 sits down. He places $10 on the table and asks the dealer for chips. The dealer replies there is a $50 minimum to play. Customer 1 digs deep into his pocket fumbles out some notes an coins and manages to make up the $50 for chips. He bets his entire mound of chips on a single hand. The dealer deals the first 2 cards, Customer 1 gets an Ace (getting excited) followed by a 10. He slams the 2 cards down on the table and exclaims "Blackjack!". The Dealer proceeds to explain to him that the game is actually Poker ad requires 5 cards. The regular over the other side of the table is seeing that this Customer has no experience in the game and is not prepared to play for higher stakes if required. 5 cards are dealt to each player. The regular bets $1000 and Customer 1 promptly folds and walks out the door. Customer 1 represents a complete novice to the industry, he has no NDA, is not even sure what an NDA is supposed to be. Has done no research into the subject and has handed over his IP promptly to the first supplier he made contact with. Basically there is no protection and the supplier is free to do as he wants. The only saving grace would be if the supplier decides to take pity on Customer 1 and allow him to leave with his dignity by folding his own hand. Customer 2 sits down, he has a few chips already and appears to at least know the rules of the game, Still he has quite a small mound of chips compared to the Regular. He bets the minimum and ups the ante a bit as cards are dealt. The Regular is only slightly concerned as he knows he has more than sufficient chips to force Customer 2 out should he get a reasonable hand. The supplier gets 3 Aces in his hand. Good enough to take a chance. The regular bets $2000 and Customer 1 complains on the unfairness of the situation but eventually folds and walks out the door. Customer 2 has some knowledge. He has gotten an NDA in place but it is only in English and does not accurately reflect the true trading name of the supplier. The supplier has a little apprehension in stealing the IP, checks with legal who advises him the NDA will be impossible to enforce in their country because it does not reflect the true trading name of the company. Knowing this the supplier weighs up the pros and cons of his intended actions and proceeds to steal the IP. Customer 3 sits down, he has a reasonable mound of chips (although some are from his home poker game that he has added to the pile to give a better impression) and appears to be well conversed in the game. The regular eyes him with some degree of trepidation, this could be a serious opposition to him winning. The regular gets a small straight (4,5,6,7,8) and knows it is a very good hand but is a bit concerned with how to proceed knowing his opposition is at least prepared. He makes a bet of $1000 which Customer 3 promptly raises to $1500. The Regular re-checks his cards and the mound of chips in front of Customer 3. A bit nervous he raises to $4000. Customer 3 then hits the situation where he is now cutting into the fake chips he has brought from home. He cannot match the bet and walks out. Customer 3 knows what he is doing, but is a little low on resources to follow through. He has NDAs in both English and the Supplier's language, has taken the time to research and insert the true trading details of the supplier into the NDAs and understands the process of litigation should the supplier dishonour his agreement. The problem he has is that the litigation process from another country is expensive and he lacks the resources to follow through. He gets his product into manufacture but this has obviously cause great financial stress and as a result h has had to cease follow-up visits to the supplier, payments are late or extended for services. The supplier starts to see that the Customer may be struggling and figures that although this customer has all the relevant procedures in place, the likelihood of him being able to do anything against an infringement on the NDAs is low. Seeing the high potential value of the product the supplier decides to take the risk and find out his assumptions were correct. Customer 4 sits down, he has a good mound of chips and appears to be well a seasoned player in the game. He also has an accomplice standing beside him apparently handing out advice. The regular is more than a little concerned here with playing against this seasoned professional. The cards are played and the regular receives a mid flush (6,7,8,9,10 of the same suit) a very good hand but still beatable. He bets $4000 which is promptly match by Customer 4 who did not even flinch at the amount. This makes the regular nervous. Either Customer 4 has great cards or he has the intention to push the Regular out of the game. Additionally the "advisor" appears to be giving regular strong tips to Customer 4 which (possibly by intention) are easily overheard by the Regular. Weighing his options and comparing the mounds of chips he decides that although he has a great hand, it is not worth the risk and folds. Customer 4 knows the situation well, or he has employed / engaged someone who does. He has bilingual NDAs in place and the company appears strong. Every attempt to cheat Customer 4 by the supplier is met with immediate and decisive action. The financial situation with Customer 4 is sufficient at least to maintain the appearance of being solvent, accounts are paid on time and either himself or the advisor conducts regular site audits. The supplier sees this as someone with experience in the outsourcing / offshoring industry and assumes that the risk to attempt to infringe on the NDA and contract is probably not worth the potential repercussions regardless of the quality of the product. The fact that Customer 4 engages in regular and random site audits also makes fraudulent activity difficult as there is the possibility that copies of Customer 4's product will be on the line during an audit. Customer 5 (final customer) sits down, assesses the past history of the first 3 players. He decides that his financial resources are not sufficient to bluff the Regular patron. He demands a game change to BlackJack, the Regular patron can follow him or not. Either situation is acceptable. Sitting at the new blackjack table he receives his cards (Q, K). He splits the card and the dealer deals on top of the 2 piles, both piles receive an unbeatable total of 21. He walks out of the casino unchallenged with his winnings. Customer 5 knows the risks are high and that if put in the situation he will likely not have the financial resources to proceed with litigation so he decides to employ an new approach. He splits his IP between 2 supplier so that neither has sufficient information to replicate the product in its entirety and market competing products. Finalisation is done either by a separate entity or one of the 2 suppliers without them having transparency to the details of the manufacture of the other parts. While there is limited risk of IP fraud by either supplier, the value they would obtain from manufacturing a copy of a partial product is so small that is is not worth chancing litigation. So next time you are considering offshoring decide whether you are represented by Customer 1-4 above or if you want to play a different game with better odds.

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No need to send your Telemarketing requirements Overseas!

Telemarketing is a very effective way to communicate with potential and existing clients. Although email is fantastic there is something special about that interaction over the telephone.  For telemarketing to be effective the person making the call must really believe in the message they are trying to get across and the business they are representing. Understandably with the costs of everything on the rise the choice to offshore your business telemarketing needs is extremely tempting. We are not by any means putting down this option; we also agree that if you’re looking for a “cheaper alternative” with the potential to have copious amounts of calls churned out that’s the way you should go. It’s our belief although that the benefits of choosing not to offshore your telemarketing requirements far outweigh the alterative. Straight up is the obvious, we are keeping jobs here in our wonderful country. Unemployment levels are now going down so if we have the chance to keep jobs here for hardworking Aussies, let’s do it. Secondly language barriers and location can prove to be somewhat problematic to your clientele. It is very frustrating when dialogue becomes confused therefore it distracts from important messages and reason for the call. By choosing an Australian company you can rest assured this won’t occur and the messaged will be relayed clearly and effectively. Overseas call centres have insanely strict rules around keeping the average handling time of a call to a minimum to ensure a strong emphasis is held on making a huge amount of calls. Productivity yes is important but nowhere near as critical as that initial relationship built when the caller takes the time to educate the potential client by getting the message across. No one likes to feel that they are being rushed especially when it wasn’t them who even made the call. We can all relate to feeling like a number on a dialling machine, it’s not very nice nor does it feel very special. Taking that extra time to market your business builds a sense of trust in your band and business. The service we can provide also ensures your customer wont here a delay when they answer the call which can automatically get them on the back foot. We have all had a call come through from a private number, waited what seems like for an eternity for someone to talk and the dialling machine to kick in. For many they have already hung up by the time the caller has introduced themselves.  At Admin Worthy we have VA’s who are all professionally trained and experienced Telemarketers who can put the recipient of the call at ease. We do not believe in sounded scripted actually in fact we find it off putting for the caller. Nobody wants to be treated like a number not a person. We are warm, caring and always represent your businesses with pride. We take the time to research and familiarise ourselves with your product and service. Another concern that may occur with off shoring is the company you hire overseers are not familiar or up to date with Australia’s strict rules around Telemarketing and the Do Not Call Register. Did you know that if your telemarketer breaches many of the rules around this practice your business is liable? The fines can be astronomical!! As an Australian company with ensure we keep up to date with all the legislation. We also conduct regular training to ensure we are all compliant Remember when someone calls a potential or existing client they are representing your business.  So what impression do you want that person to be left with at the end of the call?

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Outsourcing Essentials 101 - How to Get Started

Outsourcing work is becoming more and more popular in Australia and beyond to due a number of benefits such as outsourcing cost savings and much more. When you outsource some work to low cost countries, your cost of production reduces and you gain an advantage in the market. But as everything in the business world operates, outsourcing services aren't easy on the implementation either. Find out how to get started on outsourcing. It is becoming a common fact of many first world countries that domestic manufacture is predominantly an expensive luxury that negatively impacts your product's marketability by creating a sale price that is significantly higher than imported products. This is particularly true in Australia where the minimum wage is rapidly approaching per hour, factory overheads are increasing due to rising electricity and incidental costs, and the cost to import from another country is lower due to the strong Australian dollar. Manufacturing industry and product designers are both faced with the rapid realisation that this situation is not likely to change and survival means that occasionally tough decisions need to be made in order to preserve the future of the company and increase the market segment. With the exception of a few industries, there is little hope of the consumer or end user supporting a local product when the alternative is significantly less expensive. So  we start to look towards outsourcing work models where we send all or portions of our manufacturing to a LCC (Low Cost Country) where the minimum wage is typically less per day than we pay per hour and in many cases there has been significant investment in equipment and processes to ensure repeatable and economical manufacture of outsourced products. Issues of outsourcing work The first issue we encounter, if we have reached the decision that outsourcing work is an inevitable requirement, is " What do we select for outsourcing?" Do we send everything en-mass to a LCC manufacturer and remove any domestic contingent to our manufacturing process or do we keep key processes in-house and outsource other processes / sub-components? The company needs to first look internally before outsourcing work to a LCC manufacturer and consider the following questions: What processes are adding value to the end product by retaining these internally? Are these processes being completed by the best possible option or is there an alternative that is either less expensive or more efficient that we should be considering? Are your customers willing to pay extra for your company to manage these processes internally? Are you keeping processes in-house for none other than sentimental reasons? Do you know exactly what each process / assembly / sub-assembly costs your company in it's current form? (This needs to include set-up costs, operator costs, rework costs, testing costs, scrap, procurement of external parts, storage and warehousing as a bare minimum and should be subject to a complete and detailed analysis  to identify all costs incurred in a particular process) Do you know what your target cost for each process / assembly / sub-assembly needs to be in order for you to become competitive with other vendors / gain a larger market share? Have you allowed sufficient time and finances to embark on this process (i.e. Are you considering this process as a strategic move to enhance your business / products or is your company at a "do or die" stage)? What to consider with outsourcing services Once your company has carefully considered the preceding questions of outsourcing work, then you will need to further consider what you are requiring from a LCC vendor. Does the cost offering from a vendor hold the highest weighting in your selection. Are you aware of IP risk and have you taken measures to protect your IP prior to providing any commercially sensitive information to vendors. Are you aware of the capability differences between LCC countries and have you considered how this will fit with your corporate strategy (There are a lot more potential choices beyond China). Do you require other services beyond basic fabrication and assembly (e.g. testing, packaging, warehousing, shipping and distribution) Are you looking to deal directly with the manufacturer or do you wish to use a middleman with a corresponding markup / commission per unit produced to handle the process. Companies should be advised that at times the lowest bid does not necessarily represent the best option for moving forward with your outsource venture. Certain LCC countries may select "grey market" or counterfeit components from unreliable suppliers in order to reduce the bid price. If the vendor has a significantly lower bid price it may also be due to them not fully comprehending the complexity or requirements of the project or only bidding one part of the project with the intention to renegotiate once the contract has been awarded. Either situation causes unnecessary stress and delay to the customer and leaves the customer with a bad impression of the entire process. If you are outsourcing work as a strategic move and you are not automatically intending to award the contract to the lowest bidder without conducting a full due-diligence on the selected vendor (including site audits), then the process of outsourcing manufacture to a LCC can add significant value to your product offering and your supply chain capability. The process itself is not as simple as sending a collection of design files and documents to the vendor and waiting for the end product to arrive on your doorstep exactly as you have envisioned. Each product / process needs to be carefully controlled and verified to ensure the lowest level of risk and sources of variation / capability deficiencies are identified with he lowest possible financial risk to the customer, prior to moving into a volume manufacture situation. Do you outsource any of your tasks or do everything in-house?

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Outsourcing Essentials 2 - Supplier Selection

Lets assume you have thoroughly reviewed your products and processes as outlined in the preceding "Getting Started" article and you have also identified what your key priorities will be in selecting a supplier for manufacture of your products and the break even cost you require for this venture to be profitable and beneficial from your company's perspective. The next problem you will face is " How do you find a suitable supplier and when found how do you then make the decision about which supplier you wish to engage to manufacture your products. A first inclination may be to send a delegation to attend a few regional trade shows near to the region you are intending to outsource your manufacturing. This may be a good "eye opener" for your delegation to see the variety of products and services that are on display, but as far as yielding any substantial direction for selection of your future supplier, Trade shows can be a bit of "hit and miss". While there are some legitimate manufacturing companies attending the Trade show you will also find a plethora of trading companies that appear to be legitimate manufacturers but are actually little more than a few people in an office space attempting to market manufacturing services for companies with whom they (often) have little or no formal commercial relationship. The second issue with trading companies is the "hidden" cost involved in getting a middleman to handle all of your orders. Lets assume you are ordering 0000 of products over a year from your selected supplier and the trading company is taking a paltry 5% margin on all orders (a realistic figure will likely be significantly higher if not 100%). If your product has a relatively short life cycle of 5 years and you continue to buy from the trading company instead of directly from a manufacturer, you can expect to have parted with 5000 over the five year period to cover the margin imposed by the trading company. If you are looking at obtaining a significant saving over the domestic alternative and reducing the amount of unnecessary spend incurred in the process the best alternative is to identify, qualify and engage directly with the manufacturer. You then know where your IP information is being transmitted and have already established NDAs** in order to protect the security of your IP from copying and competition. The direct price will invariably be lower than that you are receiving from a trading company and you can develop a working relationship with the company that actually manufactures your products instead of with a third party. Assuming that you are looking to work directly with the manufacturer instead of through a third party the next issue you are faced with is the identification of potential suppliers. While there are many searchable databases that will likely provide you with an extensive list of potential suppliers (Alibaba, Tradekey, GlobalSources to name a few) the actual validity and authenticity of suppliers listed on these B2B search engines can be random. The verification process also seems to be flawed with these sites as there are often numerous complaints regarding verified suppliers accepting payment and not delivering. So  you need to have a system of double checking your suppliers prior to moving forward. This can initially be by double checking the supplier company using a generic search engine (e.g. Google) If you find a company listed on the B2B site that does not return a hit using Google then you should probably continue looking at other potential suppliers and leave this supplier in a dubious category. Unfortunately the combination above does not serve to identify which "suppliers" are actually manufacturing facilities and which are trading companies. If we return to the optimistic calculation of the fees you are going to incur if you end up using a trading company, it would probably make sense at this stage to send a company representative to perform site audits on the potential suppliers to ascertain which suppliers are legitimate manufacturers and which are simply posing as a manufacturer and skimming their profit from the difference between the fees they charge and the actual.  manufacturing costs. The representative should have a knowledge of the products and services you are looking to outsource and the requirements and equipment needed at the supplier in order to be able deliver on these products and services. You also should use a representative that has some outsourcing experience and is able to anticipate where there are going to be potential future issues through the current procedures and equipment being used by a particular supplier and suggest if contingencies or adjustments to procedure can be implemented with the supplier to circumvent these potential issues. Following the site audits of potential suppliers you should look at sending a quotation / tender package to 2-3 top ranked suppliers for submission. It will be beneficial to use more than one supplier in the quotation stage so you have a comparison of pricing from unrelated vendors and can identify where there are potentials for further negotiation with a preferred supplier prior to awarding a contract. Additionally having more than one potential supplier allows you the avenue to "walk away" from a negotiation (or give the appearance to be doing so) should talks be stalling around a particular aspect of the contract terms.   ** NDAs (Non Disclosure Agreements). A caution should be expressed here regarding the level of compliance that you can expect with your NDA with some LCC suppliers. While it is relatively easy to enforce and litigate against a violation of an NDA with another first world country, The same is not always true for LCC countries. While some countries will actively enforce violations of an NDA from an OEM by a local supplier due to the potential negative impact it can have on local industry and future investment, others may see your NDA as little more than a novelty item that they can keep for posterity or send immediately to the recycle bin and rest safe in the knowledge that local authorities are unlikely to enact on any complaint or attempt to litigate on the terms of the NDA. It pays to be knowledgeable in the selection of a LCC supplier country and be aware where you should look to manufacture if loss of IP and the resulting competition is of a major concern to you commercial viability.

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