Rik Gagnon: Outsource Your Problems
Five common mistakes that can be remedied by outsourcing.
By Rik Gagnon
With the upswing in the construction industry over the last few years, the typical industrial distributor has been either significantly stretched beyond what they can capably handle or has made the investment to increase head count, inventory and fixed cost.
Now, with the possibility of business going flat or decreasing due to winter weather or a dip in the economy, the expenditures will need to be evaluated. If distributors had initially outsourced a few of the employees hired or used a common carrier for the overflow of deliveries, a lot of the overhead would fall in place to match the sales.
The word “outsource” cannot even be found in the construction supply business dictionary. It is something that is rarely considered but should be. In fact, I bet you have already said to yourself, “I couldn’t use a common carrier for deliveries.”
Let me pose this question to you, just to make a point — isn’t over 50 percent of product delivered to you from manufacturers delivered by a common carrier? How does a fortune 500 company like Grainger deliver $8 BILLION dollars worth of goods? I know, “I’m not like Grainger,” you say, but don’t you wish you were?
Whether you initially agree or disagree with outsourcing or hiring professionals to handle special projects, beware of the pitfalls I have seen many companies make. The
following five costly, yet common, mistakes can be avoided with a new way of thinking:
1. Using outside sales people to deliver small orders daily. This is the number one reason why a company’s sales go flat — employees who are responsible for generating revenue and new sales are used as glorified truck drivers. Excusing this thinking by saying that, “Hey, he is also making a sales call at the same time,” does not hold true. The salesman making an occasional emergency delivery at most is acceptable but the flood gates can easily be opened. Get a reliable delivery service. Don’t fret on the price. You will come out ahead when you actually put pen to paper and figure out the actual cost-per-mile of using your salesman as a delivery person.
2. Using general-practice law firms for human resources issues and mergers/acquisitions opportunities. At the first sign that we need legal advice, we tend to lean on our buddy lawyer who has taken care of most of our small problems. Do not do this when it comes to labor issues.
Your general lawyer will gladly assist you in resolving these issues but in the long run, your costs can significantly outweigh the initial retainer for a seemingly more costly specialist. Your decision to save dollars can ultimately cost you the case. This is like promising a special order for something out of your purchasing power. It shouldn’t be done and it can cost a customer.
3. Not having an annual comprehensive safety inspection at your locations. This is an area that neither you nor your current staff have the skill set to conduct properly. A trained professional who keeps current on local, state and federal laws is much different than a warehouse manager whose career path started sweeping floors.
Check with your insurance carrier — many companies offer this as a free service. If you are afraid to have your insurance carrier in your facility, then there is a bigger concern looming. This is a must do.
4. Not having a solid HR review. If you have only one employee, you are at risk and should be thoroughly reviewed by an expert. Missing just one obscure rule, law or paperwork error can translate into thousands of dollars. Employees have a lot of rights, even if they don’t know it.
All it takes is a lawyer talking to an employee. Don’t be fooled, there are lawyers out there that are interviewing your employees without your knowledge. It is not uncommon for your employees to talk to strangers about your business. The problem is those strangers at the bar are sometimes lawyers seeing if your house is in order. If you have ever been afraid to terminate a poor employee because of retaliation through the labor department, then having an HR review is a must.
5. Using a relative or other in-house labor to build your website. What should go without saying, must be said. Putting your online reputation and image in the hands of inexperienced, self-proclaimed “web designers” in order to save a buck can literally direct your customers to your competition. This is an area that needs to be given to those who can professionally portray your company and be sure that your customers and their dollars can find you.
Each of these common mistakes, while made honorably to save company dollars, can ultimately cost your company exponentially more than they will save.
Outsourcing: a word that should become part of your construction supply distributor dictionary. CS
Rik Gagnon is a managing partner of 48WS.com, a website design and e-commerce company. Readers can reach him at rik@48ws.com.
CONTRACTOR SUPPLY MAGAZINE
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