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How Reduce Risk When Outsourcing Key Activities to a Vendor

How Reduce Risk When Outsourcing Key Activities to a Vendor

Even if the provider is responsible for the day-to-day management of a particular product or service, the organization is responsible for all compliance requirements.

Third parties can help organizations reduce costs, improve revenue, and improve product quality.  But a successful vendor relationship doesn’t end once you negotiate an honest price for a vendor’s product or service. By fixing an outsourcing process and monitoring your vendors’ performances, you help make sure that your company meets its long-term strategic goals.

Outsourcing a crucial component of your business operations may be a high-risk activity. There are many things that will fail along the way, and there’s no one-size-fits-all. However, a successful outsourcing initiative can provide scalability, expertise, and price control that you simply cannot get otherwise.

If you’re considering outsourcing many operations, here are six things to stay in mind to make sure success.

1. Get Clarity on Why you’re Outsourcing – and confirm You’re Ready

Organizations plan to outsource for many reasons. Cost, scalability, expertise, and geographic reach are just a few of the explanations why. But you’d be surprised at what percentage organizations plan to get into outsourcing without clarity on why. Outsourcing may be a long-term solution, so take time to try to do it right. Start by conducting a risk and readiness assessment to document and validate your business objectives and, even as importantly, ensure your organization is basically able to make the move.

2. Gain Commitment and Buy-In

Successful outsourcing projects are led by leaders who understand and support the initiative and collaborate with other stakeholders to share and acquire visions. In many cases, this won’t be easy. So it’s really important to determine and communicate a transparent vision, and support it with actual data and business rationale. Some people may resist initially, but if the choice is predicated on sound business principles it’ll make it much harder to fight the change.

3. Fix Broken Processes First

I strongly recommend against outsourcing ineffective activities hoping that, once they’re outsourced, they’re going to be repaired. The likelihood is that they’ll not only remain broken, but they’re also going to be miles far away from your control. You want to fix the issues first, either on your own or during a pre-engagement together with your outsourcing vendor. Your outsourcing initiative features a significantly higher chance of success if you hit the bottom running with an efficient set of processes.

4. Perform a radical Vendor Selection

Take some time to pick a vendor who is good at his work rather than just seeing the cost. This relationship will become a key, ongoing part of your operations. You would like to make sure your partner is in a good place to support you over the end of the day. Perform thorough due diligence and appearance carefully at factors like references, synergy, scalability, project and account management, financial stability, and adaptability. And be prepared to test-drive the process; it’s critical that the vendor’s complete program integrates and works well for your organization.

5. Build first-class Teams

Create an in-house team to help you choose your first vendor and, more importantly, support the onboarding and integration of new outsourcing vendors. That’s where the rubber meets the road. The seller Onboarding and Integration Team must still specialize in the business vision while also managing change, relationships, and of course, results. The team is going to be liable for the success of the outsourcing initiative, so confirm you’ve got assembled a results-driven team that will get the work done right.

6. Communicate

Perhaps the ‘glue’ that holds the whole initiative together is communication. It’s where success is often had, or where everything can disintegrate. While communication to gain buy-in sets the stage, ongoing communication during and after the transition is what is going to drive success. Share the plan, report on progress, and don’t hide failures.You will be amazed at how quickly you can benefit from successful supplier outsourcing projects by communicating regularly and transparently.

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