posted on 02.8.12

In today’s world of increasing costs and smaller margins, many companies are making outsourcing a common business practice to help streamline their operations and put focus on their core business… their customer.  Your customer is always someone else’s prospect, so it makes sense to outsource the non-core parts of your operations.

In recent years outsourcing has rapidly increased in popularity, due to a number of factors such as energy costs, capital equipment investment, lack of appropriately skilled personnel and a return to core competencies…to name just a few.

The world of heat-treating is no different than any other business.  A study performed by Industrial Heating Magazine found that many manufacturers who operate their own in-house captive heat treating facilities are seeking to outsource more due to specialization and capacity challenges.

Access to the World’s Largest Network of Commercial Heat Treaters allows manufacturers to easily tap into the highest level of quality standards, expertise, experience, systems, processes and customer service. No project is too big or too challenging.

It is a strategy increasingly used in a broad range of industries that are served by heat treaters. No longer just a cost reduction measure, outsourcing is a strategic decision for a growing number of companies. While many companies in the past would contract out back-office functions to realize savings or to simply eliminate a problem, today the approach is radically different. Now, executives in high-performance businesses turn to outsourcing to quickly attain improvements across departments and business processes, says a survey by Accenture, a global consulting firm. In short, many are employing outsourcing to not only cut costs but also to boost business performance. And an overwhelming majority— more than 80% of survey respondents—say that they’re in it for the long haul, committing to outsourcing as a long-term strategy to fundamentally change the way they operate.

“There’s a maturity process in the outsourcing phenomena right now and that has caused people to understand that yes, you can reduce cost but there’s a whole lot more you can go for,” says John Rollins who wrote the survey, which polled 1,200 senior executives in organizations across six industries, including automotive and industrial equipment.

The survey found that a huge majority of executives (86%) believe that outsourcing has increased their sense of control over business outcomes in many areas, most notably in planning. Also surprising was how quickly respondents said they were able to gain more control—with over half reporting that it took only six to eight months after signing the outsourcing agreement. “You don’t have to wait years and years to get some of the control benefits for moving in this direction,” notes Rollins.

The study underlined the growing scope and impact of outsourcing agreements in manufacturing.  While IT (information technology) functions remain the most widely outsourced with 43% of the respondents saying they contract out such functions, the survey found that other business practices are also frequently outsourced, including supply chain (36%), learning and training (31%), human resources (25%) finance and accounting (21%) and customer relationship management (13%).

While the principal reasons for outsourcing remain familiar—concentrating on core business activities (59%, reducing costs (54%) and containing costs (37%)– more strategic motivations are entering executives’ lists. They also outsource to more quickly attain business goals (36%), enable innovations (32%) continually improve processes (28%), and increase responsiveness to market change (28%). And underscoring the mounting expectations attached to outsourcing, 22% go this route expecting to boost revenues and profits.

Along with giving more strategic weight to outsourcing, companies should also take a different tactic in deciding what functions to outsource and what to keep in-house.  Traditional outsourcing wisdom calling for companies to retain core competencies and contract out everything else is no longer adequate. Instead, you might consider a more aggressive approach that involves outsourcing operations that do not give your company a competitive edge, regardless of whether or not they are regarded as core business activities.  This new strategy also entails dividing outsourcing partners into two groups – general-purpose service providers and “specialty partners”. In doing so, companies can realize both conventional benefits such as cost reduction and strategic gains such as added value.

For “specialty partners” in the heat treating community, you have to look no further than the Metal Treating Institute for the largest network of commercial heat treaters in the world.  Whether you are looking to outsource a part or all of your heat treating needs, click on our “Locate a Heat Treater” option and search heat treaters by location, process type, certification requirements or company name.