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The 5 Biggest Reasons Why Outsourcing Fails? 

When you’re looking to outsource your manufacturing processes, it’s easy to look at the bottom line. Often, it is easy to forget about the reasons behind your decision. However, that can be costly eventually which is also why outsourcing fails for many projects. If you don’t know the signs of failure before they happen, it could affect your business in ways you might not even realize. Don’t let outsourcing take away from your company—learn how to determine if outsourcing is right for you by reading this article on the five biggest reasons why outsourcing can fail. 

Types of outsourcing

Focusing on outsourcing for the right reasons 

Focus on outsourcing for the right reasons. When it comes to engineering outsourcing statistics, offshoring is one of those issues that seem to create a lot of buzz in boardrooms. However, most companies fail to recognize just how poorly they’re using it.  

The International Data Corporation (IDC) predicts that by 2022, roughly $300 billion will be spent on outsourcing. The U.S. spends nearly 3 percent of its total GDP on outsourcing services and products—more than any other country in the world.  

The market for online outsourcing is set to reach $237 billion by 2025, according to Incapsula’s 2017 State of Online Security Report. China is currently home to more than 25 million outsource workers and that number will continue to grow.  

The workforce management firm Kronos recently found that 68 percent of workers are interested in telecommuting or flexible work arrangements; they’re also ready to pay as much as $2,000 a year for it!  

A common reason why outsourcing fails for some projects is because their goal isn’t clear from the start, says Josh Bersin, principal and founder of Bersin by Deloitte.What exactly do you want this project to accomplish? How do you want the end result to look? If a project has no clear goal from the start, it can lead to confusion among those working on it and ultimately result in miscommunication between employers and employees.  

But before you commit to outsourcing your company’s staffing needs, read these five reasons why it can fail.  

why outsourcing fails- popularity of outsourcing

Reason #1: Work was done, but didn’t pass quality control 

Once you’ve vetted and started working with a potential overseas manufacturer, set up a quality control process. This will ensure your engineers are present during production to make sure work is done correctly.

If a third party is doing your QC (quality control) try to use people in different time zones. This is so they do not show bias toward getting things back quickly or under-cutting quality in any way. If outsourcing vendors know there will be follow-up from management on their performance it should keep things moving smoothly. Quality checks can also be put into place like checking the product against specified tolerances.  

A reason to perform checkouts after finalizing designs is the concept of tolerance stacking. Basically, when multiple parts are made out of the same materials, if one part’s tolerance increases then the other parts’ tolerances also increase. This is because they all come from the same batch. Meaning if one part does not pass inspection due to being oversize by 1mm then every part would have increased by 1mm as well. This makes it more difficult to produce consistently sized products. 

Areas for outsourcing

Reason #2: Time zone difference 

If you are outsourcing to a location that is on a different time zone, then there will be problems with regard to communications. This could be a leading reason why outsourcing fails for some companies. For instance, many engineering companies in India operate during business hours. This means that you might need to wait until late into the night or early morning before you can get back to them. This can cause further delays.

Therefore, it’s vital that your outsourcing provider offers support 24/7. This is because urgent situations could pop up at any time of day and night!

1) How do I know if my outsourced team has the skillset for the job? There are several ways to determine this. You can try assessing their website’s portfolio, checking out reviews online from previous clients and even interviewing team members over Skype before hiring them.

2) Can I visit the company who I am outsourcing to? Yes, but keep in mind that not all countries allow foreigners to visit without obtaining a visa first.

3) Do I have the power to control my outsourced team? It really depends on what kind of contract you sign with your outsourced provider. While some offer full remote management, others don’t give you access at all. 

Reason #3: You were under-prepared 

If you fail to do your homework, outsourced software development can come back to bite you. If you’re not intimately familiar with what your development team needs and how they function, it can be challenging—if not impossible—to work with them successfully. Eventually, this might also be why outsourcing fails.

Make sure you understand everything that goes into outsourcing development before jumping in headfirst. This will help ensure your project is a success, instead of a miserable flop.

Whether you have one employee working on a team of 10 or more employees directing one off-shore developer, effective management requires someone who has excellent communication skills coupled with organizational skills to coordinate all aspects of the project at hand. 

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Reason #4: Communication problems 

Especially if you are hiring people from a foreign country, it is easy to run into communication problems. Not understanding each other’s language will cause misunderstandings, which is why outsourcing fails or takes longer than planned. For example, a written description in English of how to put together an item might say that it comes with one bolt.

A foreign worker then assembles it and realizes it needs two bolts. However, neither of you knew there was a discrepancy since neither one of you spoke each other’s language. It’s important to make sure everyone involved can communicate with one another easily by learning enough key phrases in their language or by making use of translation software.

You should also take care to fully explain your expectations beforehand. This way there won’t be any potential misunderstandings during your manufacturing outsourcing process. Another option for overcoming this problem is to hire native speakers. They will know the culture, language, and customs where the outsourced work is being done. 

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Reason #5: Lack of knowledge/misunderstanding 

Global outsourcing is a natural fit for small- and medium-sized businesses. However, some companies make mistakes when implementing an outsourcing solution. For example, some don’t realize that outsourcing actually requires additional management on top of just choosing a team to work with.

Global outsourcing still means giving your project over to someone else; you still need to supervise them and keep tabs on their progress. And since you won’t be working directly with your outsourced team, it’s easy to have a lack of knowledge about what they do each day.

The best way to solve both these problems is by being open and clear with your communication; ask as many questions as possible and have constant dialogue with your outsourced team. You should also always be transparent in everything you say. Be honest and share any feedback or ideas so that the company will know exactly how to improve themselves from the inside out. 

Outsourcing best practices

Conclusion 

The point is to stay as closely involved in your outsourcing project as possible. However, it’s also important to recognize when you need a new hire or can’t achieve your goals on your own. Sometimes, outsourcing will save you time and money; other times, it may cost you too much money in labor and energy to make sense. Before jumping into a new project—whether a new product, service or department—make sure that you do some thorough planning and understand all of your costs. Product development is always difficult: If it were easy, every business would be successful! 

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