As a business, it is important that you know your strengths and weaknesses. Then, with this knowledge, you can choose to do what you are good at and pay another company to do what you are least good at. It just makes sense. For example, one area that you may not want to occupy is storing your inventory and finished goods. If your business is located in Texas, you can contract with a contract warehouse in Texas or a 3PL (third-party logistics) warehouse in Houston. If you are in California, try a California contract warehouse.
In the past, most companies considered it good business to set up the business and do all the work within the company. The founders of the corporation would choose the products to be sold and would do all the design work. This is the core of the corporation. Another fundamental activity is sales. The sales force needs strong company and product loyalty and in-depth product knowledge.
Over time, it was discovered that a company could be more nimble and bad by focusing on these central departments. That meant maybe someone else could do some of the tasks better and more efficiently. Two words apply to this type of work: outsourcing and outsourcing.
One department that can be outsourced is Human Resources (HR). There are many companies that specialize in handling profits for a business. These companies can help other companies select the best medical and other insurance at the lowest cost. Other HR-related tasks include payroll processing. For hiring new employees, there are recruiting companies.
Another department that can be outsourced is information systems (IS) or information technology (IT). Also in this area, professionals who specialize in network setup and maintenance can provide a business with excellent service.
Outsourcing software development and technical support to companies in foreign countries is in the news these days. This solution is attractive to companies because these foreign workers can live well in their countries for less money than domestic workers need. (However, domestic workers are deprived when this work is no longer available to them.) Two disadvantages of this foreign outsourcing are the time difference and the language barrier.
External operations are used by the manufacturing department. If the company is manufacturing its own product and has not outsourced manufacturing, there may still be some manufacturing processes that they cannot perform or choose not to perform. In this case, the partially finished material is sent to a supplier, who then works on the material. An example of a process that is typically performed by a third-party supplier is heat treatment.
Lastly, the business may not want to keep track of its own inventory in its own warehouses. Or maybe they have some warehouse space, but may need additional space at certain times of the year. These companies would like to make use of contract or 3PL warehouses.
Theoretically, a company could consist of only the main departments, with the rest of the work being outsourced.
