Drivng Home the Point - An Outsourcing Story in China

A few years ago, I visited Beijing for the first time. At Beijing airport, I got into a taxi and paid 450 yuan (about US$54) to get to the city. I was horrified to find out later that the normal taxi fare for the same distance was 60 yuan!

The next time, I went to Suzhou from Beijing. My local friends advised me to take a plane to Shanghai airport and catch a taxi from there. They told me that the taxi fare from Shanghai airport to Suzhou should be around 400 yuan.

When I arrived at Shanghai airport, I saw a middle-aged man holding a placard, with "Suzhou, Wuxi" written on it. He wanted to charge 200 yuan for the ride.

That caught my attention! It was half the price I expected. I checked out the man-he looked pretty decent and it seemed like a good deal. And so I accepted the offer.

The journey

The man carried my luggage to his car, drove me to a nearby spot and asked me to wait. Five minutes later, he came back with another car and another driver. He explained to me that he did not have the licence to drive in Suzhou and had asked his friend to help.

Before parting, I paid him 200 yuan and confirmed with the new driver that he would take me to Suzhou. I transferred my luggage to the new car.

During the trip while chatting with the driver, I realised that he was on the way home to Wuxi, bypassing Suzhou. The man who had "contracted" him had paid him 50 yuan.

His car stopped outside the city of Suzhou. He told me that he was not familiar with the roads of Suzhou and would help me get a taxi.

Within a few minutes, he flagged down a taxi, told the taxi where I wanted to go, paid the taxi driver 10 yuan and transferred my luggage. The rest of the journey was uneventful and I arrived safely at my hotel, on time to meet my customers.

All benefit

There were three persons in this value chain. First, the man at the airport offered to meet my needs at half the normal price. He made his money by outsourcing the "production" to the Wuxi driver, who could do it at a cheaper cost. Second, the Wuxi driver "outsourced" to the Suzhou taxi driver for the same reason.

At the end, the man at the airport earned 150 yuan, while the Wuxi driver earned 40 yuan and the Suzhou taxi driver earned 10 yuan. I was the biggest winner because I saved 200 yuan!

The bottomline is companies should focus on what they are good at, and leverage on others' strengths. But today, many companies still try to do everything themselves in-house.

For instance, IT departments within big corporations try to develop applications that are available in the market-yet non-core to their business.

Many companies also think that manpower cost is fixed, so it is better to work with existing resources than to incur additional costs in IT applications or services.

They think that manpower cost is just basic salary, and forget about the other costs such as bonus and employee benefits, as well as overheads such as recruitment and rental. They underestimate their manpower cost.

The fact is unless you understand the actual costs of a particular process or project, it is difficult to decide if outsourcing is a better alternative.

Besides costs, the question is: can you do a better job than someone who specialises in the field? Just think of the Wuxi and Suzhou taxi drivers.

Source: http://www.justlogin.com

In The News:


Creating a Dynamite Account Plan

Why do you need an account plan?When you first decide... Read More

Tips on Setting Up Your Small Business Bank Account

One of the first things you will need to set... Read More

Hiring A Virtual Assistant Can Help Your Business Grow

Are you a home or small business owner and you're... Read More

Seven Common Mistakes Made By Small Business Owners

Most new small businesses won't be in business this time... Read More

Real World Accounting for Small Business Owners

If you're like me, you love accounting. It's so fascinating... Read More

Looking for a New Office Chair?

Perhaps you are building a new home office or you... Read More

Detailing Business Options

So you want to get into the auto detailing business... Read More

Lawyers Everywhere Telling Regulators What Laws to Make

The Federal Trade Commission decided to sit down and revamp... Read More

Accounting and Billing Procedures for Small Business

No matter how small your small business is, it is... Read More

Arranging Your Fundraiser

When deciding to host a fundraiser for your company or... Read More

How To Write A Business Plan

Writing a business plan is a fundamental step to ensuring... Read More

Six Essential Skills to Business Success!

The following are six essential skills to business success. You... Read More

Loose Lips Sink Ships - The Fastest Way to Put Yourself Out of Business

I agree that knowledge should be free, but the next... Read More

Credit Repair Business Opportunities - Huge Profit Potential!

In the world today, many people are further in debt... Read More

Where Can People Find Information About Starting A Business?

Approximately 200,000 new businesses are started each year. More people... Read More

Common Mistakes When Planning Your Medical Spa

Everything starts with a business plan: If you don't have... Read More

The Truth About Government Grants for Your Business

Free money! Receive up to $25,000 that never has to... Read More

Building Marketing Momentum For Your Small Business

The success of your business depends on your ability to... Read More

The ABCs of Fundraising

There are many little details that go into making sure... Read More

SBIR vs STTR

SBIR vs. STTR: If you are participating in the SBIR... Read More

Creative Business Card Marketing

Announcements can be handed out as a business cardAnnouncements can... Read More

Franchising VS Business Opportunity; What is the Difference?

The modern Franchise business model and the much different business... Read More

Grants vs. Contracts

Commonly folks have asked me what the technical difference is... Read More

Data Loss - Can Your Company Survive? (Most Do Not)

Data. Most people think it is a term relegated to... Read More

Drivng Home the Point - An Outsourcing Story in China

A few years ago, I visited Beijing for the first... Read More