Every business has to determine whether they should perform a service themselves in-house or outsource that particular service to an outside vendor. Facility services and managements are just two of the services that can be performed either in-house or outsourced to a vendor.
The following graph shows the relationship between company size and potential need for outsourcing. As a company reaches 1,000-10,000 employees, the potential need for outsourcing drops dramatically. In organizations of this size, sufficient resources can usually be found in-house to perform a function, as well as having resources to handle backup coverage. [pic]
At first glance, it seems counterintuitive for a company to outsource highly-visible or important services. Once you look at all the things a company must do to handle a service in-house (and keep it running continuously), it becomes more evident why many companies choose outsourcing versus operating a service in-house. If a service is provided in-house, a company must: • Locate a qualified employee
• Train the employee
• Pay employee wages and benefits
• Provide the employee a physical workspace
• Provide the required equipment and technology
With outsourcing, the company must only:
• Locate a reliable and high-quality vendor
• Pay the vendor for the services provided
Trying to structure your business today can be a difficult task. With each decision that is made, there are many questions that should be asked first; What and how can we increase profits the most, What and how can we cut cost? How can I increase efficiency? How can I control capital cost? To answer that question, some businesses choose to outsource parts of it business structure. With one definition of outsourcing being the process of contracting a third party, you then have to ask yourself how or where the work will be performed. Let’s suppose that one organization, such as a hospital wanted to outsource its food service, but has decided to have the food prepared in house. The reason/advantages behind that would probably be the questions most people would ask. Some advantages are the company employees may have a better understanding of the industry, and their vested interests may mean they are more likely to make decisions in accordance with the company's goals. Also, the hospital could have the same staff but saving on health insurance, vacation pay and salaries. Having this food prepared in house, the company could be paying rent to rent the space in house, which is bringing in more revenue each month. With a hospital, you want to have food available and different times and made to order. The flexibility of time is important. If the food is made off site, it will probably be canteen food or refrigerated food instead of a hot meal. When a person is not connected to something it does not create loyalty. Something’s, need to be kept in house to reduce the possibility of law suits, etc. Also if a patients diet changes, and everything is performed within the hospital, this helps reduce errors being made. Even though most businesses/organizations try to be structured the same way similar companies do, that isn’t always the case. Now that we have seen why this hospital could have decided to outsource their food service but still have the food prepared in house, let see why another company could decide to outsource and have the food prepared outside as well.
As we have studied, some companies choose this method because of their realization of cost savings or better cost control over outsourcing its food and service. Companies usually outsource to a vendor that specializes in a given function and performs that function more efficiently than the company could, simply by virtue of transaction volume. Its rationale would be cost savings but there are also risks. "An liability can be a tremendous risk if the products or services of other...