Outsourcing is when an organisation decides to allow an outside company to take responsibility for certain parts of their operation. An organisation may chose to use an outsourcing company to change their working practices, to increase the efficiency and the effectiveness of a part of their organisations operation or it may be to increase the resources in that part of the operation which would lead to increased production and output. However, the fundamental reason and requirement, is to provide additional management support to the organisation to improve the cost effectiveness through the efficiently of their overall operation.

Companies can outsource for a number of reasons, a very common one is the need to try and simplify their business and therefore outsource non-core parts of their business. Another reason may be the need to build in more flexibility to the operation; outsourcing can be a way to get that flexibility as part of the process. Anther reason may be a lack of management time and therefore needing to bring in other parts to add some specialist expertise or additional management time and resource manning the operation. These are some of the common reasons why people might chose to outsource

Outsourcing differs from using an employment agency in several key ways. The most significant way in which they differ would be the level of management you would be ensured from an outsourcing provider which wouldn't be available from an employment agency. The management that the outsourcing company brings, in managing the operations, putting in place health and safety procedures and looking to see how you can continuously improve that operation cannot always be guaranteed by an employment agency. Another key differentiator between an outsourcing company and an employment agency would be the fact that any staff taken through the outsourcing company would remain employed by the outsourcing company, whereas any staff taken through an employment agency are then, in the eyes of the law, employed by the company taking them on.

The benefits to be expected from outsourcing would depend on what the specific objectives and goals the client was hopping to achieve as part of the outsourcing process. Some of the more typical benefits would be productivity improvement, changing working practices, improvement in through put, the ability to have a more flexible and fluctuating work force in line with changes in production, value minimization of employment liability and risks. This should result in an improvement in costs, improvements in overall delivery and service to the end customers, improvements in stockholding and improvements in quality. It can be a very wide range of benefits depending on the specific goal the client was trying to achieve.

These benefits would be measured in the same way the client would normally measure the performance of their business relations. So it would be against key performance indicators whether that be stock turnover, cost per unit, delivery performance, customer service, performance productivity measures, time keeping, attendance etc. so there will be key performance indicators set as part of the service level agreement and a professional outsource provider would be monitoring and checking these on a monthly or weekly basis against the service level agreement.