Why SMEs Should Consider Outsourcing Too

Smart outsourcing can help SMEs increase profitability, improve efficiency and streamline business processes, as well responding quickly to changing market needs.

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The past few years have been a whirlwind of change. The pandemic and related events left a lasting impact on many facets of life, including how we work. All companies have been grappling with changing employee work habits, trends like the Great Resignation and ‘quiet quitting’, layoffs – all of which have forced organizations to confront staffing challenges and rethink their hiring and compensation policies. Like all sectors, the logistics and supply chain industry has felt the impact of these developments. In 2021, the U.S. Bureau of Labor Statistics reported a 49% turnover rate in the transportation, warehousing and utilities space, and according to LinkedIn, resignation rates for supply chain managers increased by 28% between 2020 and 2021.

These numbers are no surprise given overall employment trends, and it goes without saying that they pose a significant and ongoing challenge for the logistics and supply chain industry. High turnover and worker shortages have a direct impact on productivity and workplace continuity. In logistics and supply chain especially, these challenges have long-reaching, cross-industry ripple effects, as evidenced by the noteworthy supply chain disruptions of recent years.

Compounding the problem further is the fact that recruiting and staffing are expensive and time-consuming. According to some estimates, filling an open position can cost up to three or four times what that position pays, once interview time, lost productivity and hard costs are considered. This can be particularly challenging for small and medium-sized enterprises (SMEs) that simply may not have the funds to keep up with recruiting needs, nor the internal bandwidth to manage an ongoing hiring process.

Understanding scaling options

Outsourcing is one solution to this hiring conundrum. Supply chain and logistics providers have much to gain by outsourcing key roles, including customer service, inside sales, accounting, bookkeeping, tech development and beyond. Historically, larger organizations have been the most open to outsourcing. According to Capital Counselor, bigger organizations are 66% more likely to outsource work than smaller ones. However, contrary to popular belief, outsourcing is a great option for SMEs as well, for a number of reasons.

From a financial standpoint, outsourcing presents a more affordable way to staff-up quickly and remain agile in a changing environment. While economic outlooks are brightening, there is still some uncertainty about the months and years to come. Outsourcing provides the flexibility to build up a workforce quickly when needed, as well as adapt fast if conditions change, all at a fraction of the cost of hiring locally.

Expanding reach without compromising culture

Outsourcing also allows SMEs to choose from a broader pool of applicants. Recent advances in digitization and automation have drastically altered the way supply chain and logistics companies operate, increasing the requirements for a technologically adept workforce that cannot always be found locally. Outsourcing provides access to a wider pool of talent with more varied skill sets, which helps ensure the right experts are on the job. Additionally, by expanding the workforce geographically, outsourcing can help SMEs reach a bigger audience, tap into new customer bases and deliver productivity gains by executing work 24/7.

For many SMEs, it’s important to preserve the small business culture that comes with knowing and collaborating with colleagues. Small businesses value having this kind of open communication and control over their employees and operations, and for some this could create hesitancy when it comes to outsourcing. Advances in outsourcing technology, however, should put those concerns to rest. Today’s outsourcing tech platforms enable SMEs to constantly interact and connect with individuals, sustain office culture, check status, gauge hours and output, and more – all while maintaining security across regions. This accessibility enables SMEs to treat outsourced talent as true teammates and communicate with them as such. It also provides the two-way visibility needed to ensure success for both parties. 

Other pieces of the puzzle

Of course, outsourcing is only one potential element of an effective SME scaling strategy. A company cannot scale and grow without increasing sales – either through growing current business or recruiting new customers – which means a focus on customer experience and new business is critical. Keeping an eye on market needs and adding in-demand skills to your team – either through outsourcing or local hiring – is also important to avoid falling behind the times. In a similar vein, making smart technology investments can help eliminate time-consuming manual tasks and make a lean team more productive and scalable.

No matter the strategy, outsourcing is a powerful option that SME leaders should not dismiss. Smart outsourcing can help SMEs increase profitability, improve efficiency and streamline business processes, as well responding quickly to changing market needs. Recent labor shortages and changing employment dynamics have created undeniable challenges for the supply chain and logistics sector. But with the right approach and tools, SME leaders in the space can ensure their companies have access to the right talent at the right time, to help weather the storm and support increased productivity in the years to come.