Outsourcing is a business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company. The outside company, which is known as the service provider or a 3rd party warehouse arranges for its own workers or computer systems to perform the tasks or services either on site at the hiring company's own facilities or at external locations. Sometimes, when a company wants to clear inventory from a warehouse they will sell overstock that has been sitting the warehouse too long to generate cash flow. Buyers for excess inventory like this often specialize in closeouts and are closeout wholesalers to the trade.
Companies today can outsource a number of tasks or services They often outsource information technology services, including programming and application development, as well as technical support. They frequently outsource customer service and call service functions. They can outsource other types of work as well, including manufacturing processes, human resources tasks and financial functions such as bookkeeping and payroll processing. Companies can outsource entire divisions, such as its entire IT department , or just parts of a particular department.
Outsourcing can involve using a large third-party provider, such as a company like IBM to manage IT services or FedEx Supply Chain for third-party logistics services, but it can also involve hiring individual independent contractors, temporary office workers and freelancers.For example, closeout wholesalers may want to hire an outside 3PL warehouse that can do all their shipping, receiving and even invoicing. Basically, you can outsource your entire logistics operation that can do everything from ship your closeouts to handle unloading inbound containers.
For a company to effectively outsource responsibilities, it is important to focus on the business partnership as much the logistics. Outsourcing is about managing relationship more than service-level agreements, and is a partnership, not a purchasing project. Maintaining and securing a trusted relationship is essential in outsourcing efforts and is more complex than establishing service levels and relationships. By outsourcing, you can focus on the management and sales of your business.You can work on expanding sales roles to help you sell both regular line products and sell overstock inventory that may be sitting in the warehouse taking up valuable warehouse space.
Some experts recommend placing extra emphasis on the exit clause of a service contract. It is important for companies to know when the contractual agreement inevitably times out and ensure that the involved parties fulfill their obligations and stick around until the contract is up. By not having an appropriate exit clause you may find yourself in a situation where you don’t have necessary help for long enough, or you may be left in a position where the help is terminated before you are ready. It is possible to have a specified term arrangement with closeout websites that agree to help you sell overstock for a given period of time. These contracts can last long enough to help you clear inventory from warehouse, then they can be terminated once the goal is achieved.
Companies often outsource as a way to lower costs, improve efficiencies and gain speed. Companies that decide to outsource rely on the third-party providers' expertise in performing the outsourced tasks to gain such benefits. Closeout brokers and closeout wholesalers are good examples of experts that specialize in helping businesses clear inventory from their warehouse and liquidate stock for sale. These liquidation companies vary in size and geographical location, and they can either work for a fixed profit or commission structure. The underlying principle is that because the third-party provider focuses on that particular task, it is able to do it better, faster and cheaper than the hiring company could.
Given such benefits, companies often decide to outsource supporting functions within their businesses so they can focus their resources more specifically on their core competencies, thereby helping them gain competitive advantages in their market. However, some companies decide to outsource for other reasons.
For example, they outsource because they're unable to hire in-house, full-time employees with the specialized skills and experience needed to perform certain jobs. Closeout companies sometimes opt to outsource as a way to shift meeting regulatory requirements or obligations to the third-party provider. This is one way to eliminate paying certain taxes and licenses.
Furthermore, more companies are looking to outsourcing providers as innovation centers. According to Delloite’s 2016 outsourcing survey, 35% of respondents said they are focused on measuring innovation value in their outsourcing partnerships.
The increasing use of virtual assistants is one trend where outsourcing will play a significant role. More and more, enterprises are using business-level virtual assistants to automate certain processes. This means an increased need for specialized voice assistant applications. Many companies may choose to outsource that development project for cost and skill reasons. Companies that specialize in selling closeouts and dead stock can be hired on an outsource basis, almost like a closeout broker. These businesses do not take actual title to the excess inventory, but instead act as a sales agent finding overstock liquidation buyers who can purchase the entire inventory on behalf of the vendor or importer.
If the company was American, and chooses to "offshore" that work, they may hire a development firm in India or England, for example. If they chose to "nearshore" the work, they may develop a relationship with a Canadian or Mexican third party. If they "onshore" the project, they would likely communicate with a business close by or hire independent contractors. In the case of selling excess inventory, running the logistics of a 3PL warehouse, or outsourcing distribution of liquidation inventory, it would likely be an onshore project with a business close by.
Companies also could realize that they lose control over aspects of the outsourced tasks or services. For instance, a company could lose control over the quality of customer service provided when it outsources its call center function; even if the company's contract with the provider stipulates certain quality measures, the company might find it's more difficult to correct an outsourced provider than it would be to correct an in-house team. The same holds true for outsourcing to a 3Pl warehouse. Many companies shut down 3PL warehouses and convert them back to corporate run warehouses because they find the 3PL’s don’t get rid of dead inventory fast enough, and too much inventory piles up taking valuable warehouse space. One of the best ways to avoid having excess inventory is regularly review your entire stock for liquidation products and closeouts that have become slow moving inventory. It’s better to list these products on closeout websites or contact professional inventory liquidators and get rid of dead stock before it gets too old.
Companies that outsource could also face heightened security risks, as they exchange with their third-party providers the company's proprietary information or sensitive data that could be misused, mishandled or inadvertently exposed by the outsource provider. Buyers of closeouts have loyal sources that can be compromised as would be considered sensitive information. If a business has been buying excess inventory from a great source for years and years, this information would be considered sensitive.
Leading companies understand that outsourcing some functions can help them gain a competitive advantage in closeouts by allowing them to access expertise or innovative technologies they don't have in-house; or by helping them deliver closeout products or services more quickly; or enabling them to shift resources to the areas of the closeout business that are most critical.
Merchandise USA is an inventory liquidator specializing in buying overstock inventory and distressed inventory of closeouts on housewares, toys, sporting goods, gift items and excess inventory in lawn and garden products as well as liquidation stock of pet products.