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Implementing robust strategies has become vital for the modern SME’s, to get a competitive edge. In the modern era, offering the best, is important to sustain in the dynamic market. Moreover, in the fast paced business scenario, contracting vendors is one of the common strategies that several growing SME’s adopt. A well-planned approach, which can accelerate the production process and ease out the work load of the businesses, is the need of the hour.
Let us consider an arbitrary case:
Wonder Glassworks are the manufacturers and suppliers of wide range of glass products like bottles, jars, drinking glasses etc. As a growing business, Wonder Glassworks experienced high demand for producing glass bottles with wooden cork. As they were the manufacturers of glass items, they contracted a vendor Crafty Woodworks for the production of wooden corks. Crafty Woodworks are the manufacturers and suppliers of wooden products. A contract was signed for the production of 500 wooden corks. To begin with the production activity, Wonder Glassworks, have provided Crafty Woodworks, the required raw materials and focused on their other business operations.
A common modern business practice by which a manufacturer, can hire another organization to handle operations or provide services, that are either usually executed or accomplished by the company's own employees is called outsourcing. In a typical manufacturing scenario, production outsourcing is the common practice, which can help the business in multiple ways.
Why outsourcing has become one of the principle business strategies?
Outsourcing has become important for following reasons:
- Low labor cost: Saving on man power cost, is one of the prime benefits of outsourcing. Getting people on the direct payroll can be expensive, as they are needed to pay lucrative salaries. For outsourced jobs the cost of labor is comparatively less. When Wonder Glassworks decided to outsource its production process, they saved manpower cost, as Crafty Woodworks used their own experienced resources for the completion of the contract.
- Overhead cost: Outsourcing production operation can help in saving the overhead cost. Wonder Glassworks can now save in the overhead/infrastructural cost like setting up production environment and installing machinery for manufacturing the wooden corks. Thus, outsourcing can help them in
saving initial investment cost.
- Focus: If few important operations can be outsourced, businesses can focus more on other important
aspects. After outsourcing the part of their production to Crafty Woodworks, Wonder Glassworks can now focus on the other important aspects of their business. Normally, outsourcing reduces
manufacturing costs, so businesses can focus more on sales and marketing and it can increase its profit margin as well.
- Efficiency: Outsourcing brings in efficiency and promptness to the production process. As a vendor
Crafty Woodworks have several clients and they are prompt and precise in their work. Thus, Wonder Glassworks can receive quality products and within estimated timeline. Otherwise, if Wonder
Glassworks would have taken the production process of wooden corks on their own, there could have been chances of errors, which affects the production budget.
Outsourcing can be made efficient and effective by adhering to specific parameters and processes. Wonder Glassworks could efficiently handle their outsourcing management and also make sure that the
manufacturing process remains smooth and effective by keeping proper track of all related specifications. What worked for Wonder Glassworks?
The key behind the efficiency of Wonder Glassworks, was an integrated solution that brought all the operations under a single roof proficiently, so that every operation could be in sync with each other. An
innovative, easy to use, scalable ERP solution, served as the backbone of their operational efficiency.
Features that matter in an efficient ERP:
- Contract management: An effective ERP solution can help in contract management. It can support in creating and managing contracts, accomplishment and analysis to maximize operational and
financial performance of the business. It can also help in reducing the financial risks. Both for Wonder Glassworks and Crafty Woodworks, making initial contact was important to set expectation for both
the stakeholders. This has been easy with an efficient ERP solution.
- Vendor stock visibility: To complete the order of 500 wooden corks, Wonder Glassworks delivered some raw materials to Crafty Woodworks. An efficient ERP can help in maintaining the stock record
and provide accurate insights about the residual stock availability with Crafty Woodworks. It was important to keep the track record of the materials delivered to Crafty Woodworks, to avoid any
discrepancies in future.
- Vendor manufacturing management within in-house production process: When a production cycle is outsourced, few phases are carried in-house (i.e. within the premise of the client). It is
important to have a track of the phases in order, so that a proper sequence can be maintained. An efficient ERP solution, can easily support order for a flawless process. Wonder Glassworks was really
benefitted with this feature.
- Cost of outsourcing part of material valuation: An efficient ERP can help in ascertaining the outsourcing cost and also the valuation of the materials, as mentioned in the contract. This can help
in getting an accurate insight, about the total budget for outsourcing. For Wonder Glassworks, they now know the estimated budget for their outsourced production, which helped them in planning
budget for other important business operations.
- Auto liability creation at GRN from vendor contract: Once Wonder Glassworks received the finished Good from Crafty Woodworks, they raised a GRN (Goods Received Note). The ERP solution
used by Wonder Glassworks immediately raises a payment requisition to their finance department, for Crafty Woodworks. This would have otherwise been a manual process, unnecessarily delaying the
- Compliance (GST, TDS etc.): Now whether for production or for services, the tax calculation for the outsourced vendors can be done easily and perfectly by an efficient ERP solution, with compliance to
the changed government rules and regulations. Thus, Wonder Glassworks could also get all the statutory computations easily for their vendor Crafty Woodworks.
Outsourcing can help is releasing the production pressure and help in saving initial investment cost. By outsourcing a production cycle, you can improve the efficiency and churning time of your production
processes. To maintain the proper control of the operational phases, an efficient ERP, can provide analytics/reports which facilitate, in taking critical business decisions.
EPPS offers easy-to use, highly agile, innovative, robust and scalable ERP solutions which can manage the above functionalities, efficiently and effectively. EPPS is helping companies like Wonder Glassworks
and others in different verticals, to confidently go for outsourcing their production cycle and is properly managed and tracked with an integrated system.
With a simple and efficient, mobile & scalable ERP solutions by EPPS, make your business grow in leaps and bounds. Are you outsourcing your business needs the right way?