Outsourcing
Small and medium-sized companies with usually 10-100 employees are the ones we work for. A company of that size is typically large enough to benefit from outsourcing but does not always have the opportunity to find the right business partner outside of Denmark.
At KKP Adviser & Produktion A/S, our core competence and focus are delivery and quality with cost savings. For more than 25 years, we have helped small and medium-sized companies, especially in industry, with the production of metal blanks in the Czech Republic. We have a very good and close collaboration with our Czech producers. It provides flexible production for our customers – in high quality with weekly deliveries.
Part of our strength is our carpooling from suppliers to customers. It works weekly as shown in the figure.
As shown in the figure, we combine deliveries from our business partners. Some customers get supplies from several partners, as each manufacturer specializes in the metal parts they make. Our local driver gives each pallet an address label in the Czech Republic and we drive the goods directly to our customers. We pack in the Czech Republic on Friday and delivery takes place the following Monday or Tuesday.
With our customers’ total quantities, we achieve cheaper transport per pallet by taking up the space of a large part of the truck – sometimes an entire truck. The amount of our customers thus provides a total transport saving. By filling large parts or the entire truck, we pay a price of DKK 370 – 400 + 50% = DKK 555-600 per pallet. Otherwise, the price is DKK 640 – 1500 for e.g. less than 5 pallets. In this way, our customers and we achieve a price reduction of typically around 20%. We also initiated a project to reduce our CO2 contribution to transport.
The principles of outsourcing
Outsourcing involves letting another company be responsible for part of your value chain. This could be, for example, product development, production, or sales. By letting another company be responsible for parts for its production, you as a company can focus on your core competencies.
By outsourcing your production, your fixed costs for wages and storage fall – this can help make your products cheaper. Outsourcing is often done abroad because of price.
Outsourcing must be confused with offshoring. If you move part of your company, and thus part of your value chain, to another country, this is offshoring. In outsourcing, others are responsible for production with a focus on a specific part of your value chain.
The value chain is the process that takes place when your product is added value from when you receive the raw material until the customers receive the final product. Your core competencies should preferably lie in the processes where you add the greatest value to your product. It could be, for example, that you are particularly good at product development or at making a special device or difficult assembly in your product.
There will be parts of your value chain that others are better at. These parts can be advantageously outsourced.
The advantages of outsourcing:
- This lowers your fixed costs for salaries etc.
- You can flexibly increase and decrease your production in relation to demand, without having to invest in or sell machinery
- It increases your focus and thus strengthens your core competencies
- It allows you to consult with specialists within their core competencies
