Tuesday, April 3, 2012
A Best of Barry: Five Considerations for Thinking Small and Thinking Again
A trend with thousands of downsized companies is to save money by doing more of the work that suppliers do in house. The concept is common sense--why pay a lot of money to a supplier if you can hire someone cheaper and do it in house?
I have experience with this approach from both sides of the equation. Here are the five considerations:
1) Assuming this will save money, make sure you are not sacrificing the upside of what your supplier base would bring. A brilliant concept from the supplier could bring you thousands of sales or save you millions, an in-house replacement may not--but they might be cheaper on lower-level functions. It's tough, but be honest: is this move to merely reduce costs or is it to get great work done for less money? Big difference.
2) Instead of eliminating the supplier base, seek to work in conjunction with them in this process and retain some of their services. Why? Because, otherwise your in-house team will make decisions on whether they can do the work--of course, they will think they can--their jobs are at stake.
3) Ask the tough question: if this in-house person is so good, why isn't he/she working for a supplier, or better yet, running their own firm?
4) Cherry-pick if you must, but cherry-pick not only the supplier, but your in-house alternative. There are functions that probably can't be done effectively in-house. Face it, identify them and make sure you're covered.
5) Do the math. It sounds obvious that a $40k a year in-house employee will be a bargain over the supplier. But do you need 40 hours a week, or would you be better off negotiating with a supplier for a package price for low-end work, or even considering part-time contractors to do the work that is needed and nothing more?
Thinking small can work if you think through the process.
Barry LaBov
LaBov & Beyond
Fort Wayne, Indiana
www.labov.com
Originally posted 01/17/11
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I agree with the idea that sometimes in-house work is not as beneficial to a downsized company as having that work done through a supplier. Barry LaBov brings up good arguments for both sides, but I feel that when a larger company is changing into a smaller one it can be difficult and quite stressful to add more responsibilities to your current employees' work load. To avoid stressed-out workers producing sub-par products, it may be best to speak with a supplier and negotiate a cost-efficient plan.
ReplyDeletein our Fort Wayne office, we do much of what you've said. If you have a multi-pronged approach, it's much easier than relying on just your employees or just one supplier to make huge sacrifices. And you're right, it is tough to wear more than one hat, so to speak.
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