10 Keys To SME Outsourcing
September 15, 2007
Lower costs in Asia are not just for large firms anymore. Products, technologies, and services have become steadily cheaper, enabling small and medium enterprises, or SMEs, to take advantage of the savings and flexibility found in Asia. This is particularly true in places where large companies have already established infrastructure and sound labor practices.
As you think about doing business in Asia, keep in mind that smaller firms face different challenges than larger ones when outsourcing or moving operations thousands of miles from home.
There are fixed costs that will add expense to smaller companies, like the cost of additional workers when shifting a job or process to Asia. For senior managers, monitoring and managing work abroad takes time away from other priorities. And problems with employee retention and work quality can destroy an operation that isn’t carefully established or supervised.
Key Things to Consider
- Be clear about the primary objective for going to Asia. Is it cost savings? Proximity to the local market? Something else? Answers to these and other questions will determine how you establish your entity in Asia.
- Find reliable partners to help you get started in Asia. Look for companies whose local people understand western business practices.
- Take your time when hiring the CFO/finance and HR/administration managers as these are arguably the two most important functions in the Asia organization.
- Locate your first offices in regions where the big guys are. Other companies will usually be willing to help once you have developed relationships with them.
- Monitor quality closely utilizing the same standards and processes you use at home. Quality errors can be particularly harmful to smaller businesses and they can be difficult to resolve from afar.
- Ensure that key managers visit your Asia operations and suppliers frequently. No news from Asia could mean bad news for you. Also, take care to budget for the travel expenses.
- Establish consistent company-wide training for all workers.
- Track the retention of workers very closely. The departure of a few key employees could cripple the operation.
- Take care to account for all of the costs of establishing an operation in Asia. Hidden transactional costs can hit your bottom line hard.
- Make sure that your materials are being supplied by original sources and to the required specifications, even as you continue to request lower costs.