Outsourcing as a Path to Operational Excellence for Consumer Product Companies

My firm, Fesnak Outsourcing, is presenting an event entitled “Outsourcing as a Path to Operational Excellence for Consumer Product Companies” on the evening of April 2, 2014. This is the first in a series of Growth Summit events planned by parent firm Fesnak LLP. Click here for more information and to register.

Consumer products companies are progressive in their use of outsourcing and the deployment of virtual business models, so we felt that this industry would be an ideal audience to benefit from an event on outsourcing. Experts in functional areas such as finance/accounting, manufacturing/sourcing, logistics/fulfillment, and marketing will present best practices and emerging trends that consumer product companies should be aware of, whether they outsource or not. The event will also be a great opportunity to network with industry colleagues to make new connections and share ideas.

We hope to see you there!

 

 

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Outsourcing as Brand Equalizer

A recent post by Grant McCracken on the Harvard Business Review Blog Network (“The Black Swans Circling P&G,” June 21, 2013) claims that “we are watching the death of the big brand” and related consumer preferences and marketing techniques. While this is debatable – and indeed disputed by a number of readers in the post’s comment section – what is not arguable is the rising power of small brands. As McCracken’s post notes, “…small players make all the things that once could only be made at scale: beer, soft drinks, watches, razors, clothing, make-up, laundry detergent. With a webpage as their store front and FedEx as their channel, they can reach consumers anywhere. And, yes, of course, these are tiny operations. But large always starts small.

While there are many factors driving this trend, outsourcing is certainly one of its key enablers. Outsourcing has leveled the playing field for transforming a product idea into a viable business. From design to prototyping to marketing, from manufacturing to fulfillment and distribution, outsourced service providers are available to cost-effectively provide the same economies of scale that were previously available only to the largest companies. When even such core functions are outsourced, it is no great leap to also outsource corporate support functions such as legal, IT and finance.

In my opinion, it is a bit of a stretch to sound the death knell for big brands – just as it was premature, in hindsight, to think that the ecommerce upstarts would kill off all the brick-and-mortar retailers. But there is no denying that there is more opportunity for small consumer product companies than ever before. David doesn’t have to kill Goliath to have a nice life for himself.

Consumer Product Companies Get It!

Last week I attended the Consumer Healthcare Products Association’s annual Market Exchange. Although it was the third time I have attended this event, I am always struck by the extent to which consumer product companies have embraced outsourcing and virtual business models. These companies, particularly those at an early- or emerging-growth stage, outsource product manufacturing; order fulfillment, invoicing and logistics; payroll; information technology; accounting and finance; public relations; and even some aspects of sales and marketing. Each year, the ecosystem of outsourced service providers at the event seems to expand.

Management guru Tom Peters said, “Do what you do best, and outsource the rest.” So what is it that consumer products companies do best? Develop, grow and manage their brands. Once a brand strategy is defined, outsourcing plays a prominent role in tactical execution within key functional areas. With a relatively small internal team, revenue-per-employee hits previously unheard-of levels.

Consumer products certainly isn’t the only industry that exemplifies the virtual business model. Technology and life sciences companies clearly “get it,” and businesses in every industry use outsourcing to some degree. But the power of virtual business becomes very clear as you hold in your hand a physical product that was neither manufactured nor shipped by the company whose name the product bears. Yet the brand occupies a place in the consumer’s mind, as a brand by definition must.