Why Outsource when we can do it ourselves
Outsourcing is not about whether you can do it yourself, its about spending money in the most effective and efficient way possible.
“Bang for your Buck!”
How do we loose “Value for Money” when we Do our Own Property or Facility Services.
There are several reasons:
- The Employee could be performing core business activities instead
- The Lack of buying power from the single purchaser
- The Lack of expertise in specialised areas (one person can’t know it all, but an FM team will know more)
- You’re negotiating with vendors from a single purchase point of view, there is only limited opportunity for the vendor
- Large Network of suppliers and vendors which have been tested over many years and vetted over time
- Specialised and focused expertise in property services
Let’s take number #1, “The employee could be performing core business activities instead of Property services management.
Lets do the Maths:
Employee/staff member costs the company say $45 per hour
Lets say they spend 24 hours per week on property services
so that is 24 x $45 = $1,080
Now that employee, could be working for the core business, so the employee performing non core activities means another person in your organisation is doing these activities plus the lost opportunity the original employee may have gained for the business in those hours.
that cost, at a minimum is $1,080
So the total cost is $2,160 + Lost opportunity (we can’t quantify an opportunity loss)
There is also the added margin by vendors whom are selling “retail” prices to single purchase customers.
False Economies are not always applied directly to the bottom line
So what is applied directly to the bottom line?
Direct Property services costs such as
- Maintenance – Service Level Agreements
- Facility Management Labour costs of the employee,
- Emergency callout costs
- Property Services Administration Costs
Then, What is NOT Applied to the bottom line
The cost of the employee NOT performing core business activities($1080),
The cost of the potential opportunity loss,
and the cost of not obtaining the best possible “value for money” from suppliers and vendors.
The Suppliers and Vendors will typically sell to a “retail customer” a “retail price”, the difference between the retail price and what might be possible is not measurable by the company it self, it is seen by the vendor as they know their margins for “retail” customers versus their margins for “non-retail” customers such as dedicated and specialised companies.
What are your thoughts?
There are a lot of parameters to consider and individual company circumstances will vary, we’d be interested in other people’s view.
Hope to here from you soon.