The use of subcontracting by a company is motivated either by insufficient financial and/or organizational capacity or by a need for a specialty or a technical deficiency. A short tour of the advantages and disadvantages of this method.
WHAT IS OUTSOURCING: DEFINING ELEMENTS
Subcontracting is ” the operation by which a contractor subcontracts, under his responsibility, to another person called subcontractor the performance of all or part of the contract of business or ‘part of the public contract concluded with the owner ‘. That is to say that a company delegates to another part of its production, some elements necessary for its production or all or part of the realization of a contract. Rpo recruitment is the most outsourcing process
This type of cooperation offers many advantages for the company but also has some disadvantages.
BENEFITS OF OUTSOURCING
- By definition, to the extent that, as a subcontractor, a company discharges itself of certain tasks, the production of certain elements or a part of a contract, it allows itself more flexibility and can access material/skills/ technology / etc. that she does not own internally.
- For example, a company recovers a large contract that will require, on time, more production capacity / complementary skills / specific equipment / etc. She then has two solutions:
- Purchase equipment / hire additional staff / etc. : the cost is high with some uncertainties. Will it be able to fully exploit the equipment/personnel/ etc. integrated into the business? Will the mid-term cost does not absorb the revenue generated by the contract?
- Sub-contract all or part of the contract to a subcontractor: the company is then committed only for the performance of the contract and can benefit from the forces of the subcontractor at a freely negotiated price, without risk of penalizing its profitability.
- In addition, in doing so, it can focus on its core business or medium and long-term projects, including research and development for example. It is often in this logic that in small businesses, accounting, prospecting or other commercial and administrative tasks are outsourced.
In summary, outsourcing therefore allows:
- Better use of the division of labor and therefore specialization. The company will also be able to focus on its research and development and innovation activities by delegating the manufacturing of its products to its subcontractors.
- Greater control over quality, costs and manufacturing lead times.
- Better responsiveness of the company in the face of increasing market demand.
- An increase in production volume and flexibility of production processes.
- A reduction of the risks of technical failures.