What is Outsourcing? Types and forms of outsourcing

Recently, Outsourcing specialists have become much more appreciated, so many companies attract employees from external sources. Personnel outsourcing service is top-rated nowadays; not everyone knows what it is and how outsourcers work. This service comes to the rescue when you need to save the company’s budget and effectively organize your work.

What is Outsourcing?

What is “Outsourcing”?

The term outsourcing means an external source. Outsourcing services involve the transfer of certain functions to specialists from another company. As a rule, this applies to secondary industries.

External contractors under the contract provide catering services, transportation, advertising, cleaning, marketing, security, etc. The outsourcing company is engaged in the outsourcing of personnel: the transfer of personnel to other firms and companies. Recently, this industry has been actively developing due to the demand for the services of contractors.

The essence of outsourcing

Outsourcing work is based on the fundamental principle: keep for yourself what you can do better than others. Outsourced employees are transferred to what they can do better than the staff of the client’s company. The main purpose of transferring functions to outsourcers is to free up resources and concentrate all the company’s efforts on competitive advantages.

Outsourcing services help the customer reduce the company’s costs for taxes, sick days, vacation, pension fund contributions and more. In addition to reducing additional costs, the client saves time in organizing the work of employees and in creating a staff of employees. The main advantage of outsourcing is that it helps the customer to concentrate on his own core production, without wasting time and money on additional activities. Subcontractors are more experienced than complementary staff members.

The procedure for attracting a subcontractor provides for the conclusion of an appropriate contract. Each party is legally responsible for the fulfillment of its obligations. Depending on the type of subcontracting chosen, certain company functions related to IT, personnel, accounting and others are transferred to subcontractors. The client under the staff leasing contract must pay for services on time. The subcontractor’s responsibility is to provide qualified employees.

Positions covered by Outsourcing

The answer to the question, What is outsourcing, can be obtained by studying the functions it provides. All functions can be assigned to third parties, but the service does not apply to the selection of management personnel. Companies use outsourcing companies to transfer the following responsibilities:

  • Accounting
  • Human Resources Administration
  • Employee payroll calculations
  • Perform tax operations
  • Equipment service
  • Ensuring the operation of the office
  • Software
  • Maintenance
  • Execution of written, oral, and simultaneous translations
  • Information support
  • Creation and control of advertising campaigns
  • Security
  • Regulation of legal issues of the company
  • Project development and implementation
  • Logistics and delivery management
  • Cleaning
  • Performance of production functions.

Types of Outsourcing

For efficient business conduct, the company can transfer non-core functions to the contractor. In practice, companies use various services, of which there is a large number nowadays. It is necessary to choose an outsourcing company considering your company’s requirements. Below are the main types of outsourcing that are being developed in Mexico and other countries.

Industrial Outsourcing

High-tech industrial companies often outsource the processing, assembly, and testing of products to contractors. The entire process is outsourced to telecommunications companies. Outsourcing manufacturing helps reduce the cost of manufacturing products and increases the level of reliability and quality. Transferring some of the responsibilities allows you to concentrate on developing new products, selling and promoting existing ones.

IT Outsourcing

This industry is one of the most demanded and includes a wide range of functions that are related to the maintenance of computers, equipment, software. IT Outsourcing: Can be attributed to equipment maintenance, software development. The popularity of information technologies around the world makes this type of industry one of the most demanded.

Outsourcing of knowledge management

This species is just beginning to develop in the United States, so some countries are not familiar with it. The service involves the management of the company’s processes, which require in-depth study and serious analytical processing. Outsourcing companies take over the training and management of the knowledge base. The information in the future can be used to make important management decisions.

Accounting Outsourcing

This industry helps to reduce costs for a company to organize its own accounting. Various functions are delegated to contractors within the industry. Accounting outsourcing is one of the most popular forms of the industry the outsourcing of accounting and reporting responsibilities. It is important to note that the client’s company management is responsible for the outcome (responsibility is not transferred under outsourcing along with the responsibilities).

There are several options for cooperation:

  • Accounting
  • Reporting
  • Tax accounting
  • Full service (daily accounting, time period reporting, creation and completion of primary documentation).

Outsourcing of labor

In large companies, where the possibility of staff turnover is not excluded, this type of service is in demand. These services are provided by personnel agencies, which helps the company to significantly reduce the cost and time spent on personnel management. The specialists of the outsourcing company can take care of the recruitment of employees, calculations of the tax burden on salaries, bonuses and compensation. It is important to note that the recruitment agency is not responsible for the quality of work of the hired personnel.

Legal Outsourcing

Small and medium-sized companies actively use the services of legal outsourcing firms. Contractors provide labor and tax services. In addition, subcontractors can be brought in for the proper reorganization, registration or liquidation of a legal entity. As a rule, in-house lawyers are much more expensive than the services of contractors, due to the low workload of the specialist.

Logistics Outsourcing

Transportation outsourcing involves the transfer of transportation or delivery functions to third parties. This is suitable for companies that need to ship goods periodically over certain distances, but do not need their own transport department. Recently, the logistics outsourcing market has been actively developing. Contractors can perform warehousing and transportation tasks.

Outsourcing Company

A subcontractor is a highly specialized company or a company with a wide range of services that provides personnel to other companies on the basis of a temporary cooperation agreement. The tasks of such contractors are to create an asset of the company, which includes qualified employees of various specialties, full-time and on standby.

What does an outsourcing company do?

Depending on the profile of the subcontractor, you can offer potential clients the following types of services:

Legal advice
Insurance activities
Preparation of tax reports
Office printing;
Web site promotion.

Outsourcing Agreement

All relations between the customer and the subcontractor are governed by the relevant contract. The object of the transaction is the provision of personnel meet certain qualification requirements. The essential terms of the subcontracting contract are presented below:

  • Subject of the agreement
  • The number of employees involved, their qualifications
  • The amount of work to be done
  • The cost of the contractor’s services
  • The procedure for payment for services
  • Rights and obligations of the parties
  • The term of the agreement
  • The procedure for accepting services

Examples of Outsourcing

In practice, you can often find outsourcing relationships. For example, many manufacturers and retailers cooperate with call centers so as not to organize them on their territory. Recruitment agencies are also in great demand, especially in large cities. The following are specific examples of the use of the service:

  1. One automotive company manufactures only 1/3 of its own production on its own, the rest is given to subcontractors.
  2. Another giant, which has appreciated all the advantages and disadvantages of subcontracting, and is actively using this scheme of work, is the company IKEA. It has practically no own production, cooperating with thousands of suppliers. Transportation functions at IKEA are delegated to a third-party organization, so the company directs all its resources to the retail sale of products.
  3. In the 1990s, Kodak transferred all IT areas to IBM, which was aiming for leadership in this segment and had this opportunity.

If your company is looking for a warehouse or industrial building, VYNMSA is the best option. We like to work closely with our clients, always adapting to their requirements and exceeding their expectations.

At VYNMSA we would like to help your company establish itself in Mexico. We have almost 30 years of experience and have delivered more than 450 projects to satisfied international clients. We are one of the leading industrial real estate developers in Mexico. We have the know-how to develop customized or Build To Suit projects. We also work actively with industrial brokers as business partners; we have around 20 inventory buildings ready for immediate occupancy, a total of 2 million square feet of space in the northeast and the Bajío region.

Contact us and find out why VYNMSA is your best industrial real estate business partner in Mexico.

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