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The chances are that you’ve heard of outsourcing. But what exactly is it? And how can brands use it strategically to save time, save money and gain expertise? Well, we’ve broken it all down for you along with a selection of our favourite outsourcing examples. Enjoy!
What is outsourcing?
Outsourcing is when a task or responsibility is designated to a partner. While it can happen in-house (for example, a team might decide to designate a task to another department), it usually happens externally, with one brand outsourcing to another.
So, what does it look like? Well, to help shed some light, we’ve broken this type of strategic partnership down into two subcategories: supply chain partnerships and external outsourcing.
In a way, supply chain partnerships are a type of external outsourcing that involve designating the manufacturing of a product to a partner. However, they have their own unique set of benefits, challenges and considerations, so we thought they deserved an explanation of their own.
With that in mind, here are the two main kinds of outsourcing as we see it and some examples of each – beginning with the all-important supply chain partnerships.
Supply chain partnerships
A supply chain partnership is when two (or more) brands team up from different parts of a supply chain. Essentially, it allows the primary brand to outsource the manufacturing of their product to a supplier, saving them time, money and resources.
Meanwhile, the supplier gets to focus on doing what they do best (actually making the product) without having to worry about marketing or distributing it to the end customer. So, it’s a win-win.
But what actually makes them a strategic partner as opposed to just a vendor or a ‘preferred supplier?’ It’s a good question and one that doesn’t always have an easy answer.
Usually, a strategic supplier partnership involves a more intimate relationship than simply paying another brand to fulfil a specific quota. It will involve both brands sitting down with one another to regularly evaluate how the partnership is working and what they can do to make sure it brings maximum benefit to both parties.
The partners should also have a shared vision and strategy, and both should have some skin in the game. In other words, to be a strategic partnership, it’s important that there isn’t just one brand taking on all of the risk. Instead, both partners should stand to either benefit or lose out based on a partnership’s respective success or failure.
3 best supply chain partnership examples
1. Toyota and Lotus
The automobile industry is a hotbed for supply chain partnerships. And Toyota’s relationship with Lotus is just one example. Toyota has been manufacturing the engines that power Lotus’ sports cars for years.
In 2010, the partners went a step further and announced that Toyota would now be manufacturing ‘tailor-made powertrain solutions’ for Lotus cars. By outsourcing to Toyota in various guises over the years, Lotus has been able to sell cars for less and pass strict emission laws in the US.
Better still, the partnership has made the most of the partners’ individual strengths to create a truly premium product. While Lotus crafts beautiful, lightweight cars, Toyota’s reputation for reliability and quality means that owners barely have to worry about how many miles they put on the engine.
According to AutoGuide, the Toyota Motor Corporation President explained: ‘A Toyota engine in a Lotus car creates a completely unique drive feeling – a special blend featuring the best of Lotus and Toyota that we hope many car lovers continue to experience and enjoy.’
So, although this is a perfect example of a truly successful supply chain partnership, it could just as easily be listed as a product partnership as the product just wouldn’t be the same without both parties’ input. Ultimately, it’s pretty rare that a strategic partnership fits perfectly into just one box!
2. BadRobot and Warner Media
Ever wondered why there are often multiple companies listed in the opening credits of a movie? Well, it’s because most movies are made using a supply chain method. Bad Robot and WarnerMedia are just one example of this kind of supply chain partnership.
Essentially, Bad Robot is a production company that makes movies and television shows. These are developed in conjunction with a studio that is then able to distribute them.
In 2019, the production company officially announced it had signed a five-year deal with WarnerMedia. The deal saw Bad Robot being paid at least $250 million to produce films, TV shows, video games and more, exclusively for WarnerMedia (according to The Hollywood Reporter).
Aside from benefiting financially from the deal, Bad Robot is able to focus on what it does best (actually making the movies) rather than worrying about the marketing and distribution side of things. In this way, you could also see the deal (and ultimately, most supply chain partnerships) as a kind of distribution marketing partnership – while Bad Robot makes the products, WarnerMedia distributes them.
Meanwhile, the deal came at the perfect time for WarnerMedia which was, at the time, planning to launch HBO Max in the US. Obtaining exclusive content from the production company created by JJ Abrams (the director of Star Wars) would be a powerful strategic tool, enabling the streaming platform to get ahead of its competition.
3. Intel and a range of computer system manufacturers
Intel is a fantastic example of a company founded on supply chain partnerships. Amongst other products, it makes and supplies microprocessors to computer system manufacturers including Dell, Lenovo, HP and, until recently, Apple.
Intel is widely recognised as the market leader when it comes to central processing units (CPUs) and played a big role in fostering the fast growth of the computer industry. Although its main competitor, AMD, is fast gaining ground, Intel still holds the reputation for quality, speed and reliability.
In this way, computer manufacturers that use Intel processors don’t just benefit from outsourcing to a brand with a high level of expertise. They also benefit from leveraging Intel’s reputation when marketing their products. In fact, most of the products that contain Intel processors sport an ‘Intel inside’ sticker. This is just one example of the way Intel’s name is used as a marker of quality and trust (and could also be seen as a fantastic example of product-based co-branding).
After nurturing a supply chain partnership with Apple for many years, their relationship came to an end in 2020 when Apple decided to start manufacturing its own chips for its Macs. According to CNBC, this was in part due to Apple’s ambition to eventually own its core technologies, demonstrating a key issue with outsourcing partnerships for suppliers – what happens to a supplier’s distribution channels when a key partner decides to stop outsourcing?
Luckily for Intel, its deal with Apple wasn’t an exclusive one and its processors continue to be used by most other computer manufacturers today.
External outsourcing partnerships
Just like how brands might outsource the manufacturing of a product in a supply chain partnership, many brands will outsource expertise, business processes or administrative tasks. This could be anything from marketing to accounting, tech support to customer service… the list goes on!
Often, brands will choose to outsource in this way because they lack the time, money, resources or expertise to carry out the tasks in-house. This might be because a brand is too small to warrant appointing a full-time employee for the task. Or it might be because the brand is looking to scale and they don’t currently have the in-house resources required to do so.
For example, a brand might outsource IT responsibilities to a remote company because they don’t have the resources (or need) for an in-house IT expert. Or they might partner with a designated brand for accounting because they don’t have the budget to employ an in-house accountant (or the expertise to sort out the company accounts themselves).
Another consideration for tech brands is the need to avoid a single point of failure. If a brand builds all its own technology and processes, and relies on them to manage and protect its own technology and processes, that can become problematic when something goes wrong. In fact, this is a lesson that was demonstrated loud and clear by Facebook's worst-ever outage. By partnering with tech providers, companies can better avoid a single point of failure and they'll have more options if things do go wrong.
Although both these examples generally involve the primary brand paying their partner brand to carry out certain responsibilities, not all external outsourcing has to involve a straight-up transaction. Instead, brands could do an ongoing skill-swap (for example, a computer repair shop could offer a discount on repairs in exchange for website design). Or brands could come to an agreement whereby they both agree to use the other’s services exclusively, in exchange for a discount. The options are endless!
3 best external outsourcing examples:
1. Ablewell Care and Focus IT
Focus IT provides strategically managed networks for small to medium-sized brands that have minimal IT resources. The provider focuses on providing end-to-end management for brands’ computer networks so that they can worry less about their IT and instead focus on what they do best.
Home care brand, Ablewell Care, decided to partner with Focus IT as they were about to move offices and their previous one-man-band provider was no longer suited to their needs. Delegating this side of their business operations meant that the switchover during their office move was facilitated for them, saving them a great deal of time.
Not only this, but Ablewell Care is able to rely on their partner to manage their backups, system monitoring and call-outs and to continuously recommend improvements that could help them to run their business and systems more quickly and efficiently. Ultimately, they gain expertise through the partnership that they wouldn’t otherwise have.
2. Argos for Business and RSVP
RSVP provides customer service for a range of brands including Argos for Business – a leading retailer offering businesses merchandise, incentive and motivation solutions.
With a team of customer service agents on-hand to answer calls from both B2B and B2C customers, RSVP is able to answer a wide variety of queries on their partner’s behalf. By being their partner’s voice in a customer service capacity, RSVP acts as an extension of their partner brand’s team, allowing them to scale while saving them resources.
Although you might think that outsourcing your customer service could be risky, given that you’re relying on another party to speak to your customers directly, RSVP claims to resolve 90% of customer queries the first time.
Lisa Goward, the Client Service Manager for Argos for Business states: ‘We enjoy a warm, friendly and proactive partnership with RSVP,’ showing that trust and open communication is key to this kind of outsourcing.
3. Octopus Group and Sanctus
Outsourcing employee mental health coaching (or offering employee mental health coaching at all) is a relatively new concept, but one that’s becoming ever more popular.
Sanctus partners with businesses to improve mental health in the workplace, and Octopus is just one of the brands that it works with. Essentially, Sanctus provides brands with qualified coaches who offer employees 45-minute private sessions to speak about whatever’s on their mind – from looming deadlines to strained relationships with colleagues.
It’s unlikely that Octopus would have anyone in-house qualified to offer these coaching sessions, so by outsourcing, they’re gaining very specific expertise. Perhaps even more importantly though is the fact that, by outsourcing to Sanctus, Octopus is able to improve their employees’ emotional wellbeing and happiness at work. This is likely to help the brand retain its employees and get the best out of them.
It’s also worth noting that CSR is becoming increasingly important – Accenture claims that more than half of customers in the UK want companies to take a stand on issues they’re passionate about, while Cone Communications reports that 64% of millennials would refuse a job from an employer without a strong CSR policy (read more about this in our list of strategic partnership stats).
By partnering with Sanctus, Octopus is showing both its employees and the wider public that it’s tackling the issue of mental health, in a similar way to how other brands might form a charity partnership. In fact, the CEO and Co-Founder, Simon Rogerson, calls it ‘the most successful partnership Octopus Group has made in 20 years’ (according to Sanctus).
Outsourcing pros and cons
Up until now, we’ve pretty much only focused on all the good things that an outsourcing partnership could bring to your business. But it’s not all sunshine and roses. Before you take the plunge, make sure that you weigh up these pros and cons.
- Prioritise: Outsourcing allows a brand to focus on gaining more revenue by doing what it does best.
- Save time: By outsourcing time-consuming tasks and operations, brands can save time. And as we all know, time is money.
- Scale: Outsourcing tasks like customer services and telemarketing can allow a brand to scale more quickly than it otherwise could, given its limited resources.
- Gain expertise: Designating tasks to dedicated experts can improve quality, especially when it comes to areas that require a great deal of knowledge, like IT or finance.
- Leverage reputation: In some cases, partnering with a well-known brand can help to improve the reputation of the primary brand and its products.
- Differing priorities: The primary brand will usually be most concerned with quality, while the secondary brand will usually be most concerned with cost. This can lead to conflict.
- Sacrifice in quality: Partnering with the wrong brand could lead to a compromise in quality, especially when it comes to supply chain partnerships.
- Impact retention and acquisition: If quality is compromised due to outsourcing, this could negatively affect your retention and acquisition.
- Lack of control: Outsourcing requires trust. You can’t always see exactly what your partner is doing, so you’ll need to be able to trust them to deliver the results they’ve promised.
- Loss of identity: It’s important not to outsource the aspects of your brand that set you apart from your competition. This could see you losing part of your brand’s identity.
- Higher costs: Outsourcing expertise such as IT support and accounting may cost more per hour than hiring a full-time employee. Small businesses that only need a few hours here and there will likely save in the long run but as you grow, it’s important to reassess your ROI.
As you can see, outsourcing and supply chain partnerships can come in all sorts of different guises. While some of them border on the transactional, others are fully-fledged strategic partnerships that involve both brands working together to receive a similar level of benefit.
Have you been inspired by any of our outsourcing examples? If so, why not start the hunt for your own outsourcing partners? Simply book a demo with Breezy to see how our partner search engine can recommend hundreds of potential partners that could be the perfect fit for your brand.