Tips to reducing outsourcing costs

By Freddie Pierce
Before you read this, click in the upper right-hand corner of this page to view this story in our digital reader. Trust us, it's way cooler! The da...

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The days of ridiculously low overseas wages are coming to an end. Developing nations like India and China are dealing with rapidly rising inflation, as workers demand higher wages. No longer can companies wave a magic wand, say the word “outsource,” and see a difference on the bottom line.


Saving money when outsourcing has been a challenge. Without farther ado, here are Supply Chain Digital’s top tips to lowering outsourcing costs.



Choosing an outsourcing location based solely on what you’ll have to pay offshore workers is a bad idea, especially if that location is halfway around the globe. Nobody wants a 9,000 mile supply chain.

Instead, it’s sometimes better to look closer to home when outsourcing. Finding a skilled labor base that’s time zone friendly to your corporate headquarters can drive down costs associated with training.


Communication tools have come a long way over the past decade. Instead of hiring someone to train your new offshore workforce, consider using meeting tools such as Skype, Microsoft Office Live Meeting or other video conferencing technologies.

Webinars are also a great tool when trying to cut down on outsourcing expenses. According to, “using online tutorials or webinars can speed up the transition cycle and address a possible skills gap with offshore resources.”

That way, you can have someone in-house train and communicate your team from your corporate headquarters, where you can keep a watchful eye over the situation.


Certain countries have certain competitive advantages when it comes to outsourcing in a particular field. For example, Vietnam’s Ho Chi Minh City is an excellent choice to outsource application development and maintenance, while Buenos Aires Argentina’s population has a highly literate IT population.

Choosing the perfect location with a workforce whose skills suit your company’s needs can cut down on costs associated with the hiring and training process, keeping your business in the black.


Only hire part of the offshore team during the transition phase, when you’re still figuring out exactly how you want the outsourcing process to work. While the obvious savings can be seen by having fewer workers, training costs for your offshore team will also decrease with fewer workers.

Once your operation is up and running, the more experienced members of your outsourcing team can take the reins on training the new-hires, further driving down expenses.

According to, outsourcing just the core of your offshore team in the beginning can save between 4 and 5 percent in the total transition costs.


Consider moving part of your core team to the outsourcing location. These team members can use their knowledge to help train the offshore hires, and can act as the bridge between the corporate and outsourcing teams.

Moving part of your team offshore can also help costs associated with employee wages, where you can scale back outsourced team members wages but keep them competitive with cost-of-living expenses in the new area.


If you’re able to map out an offshore outsourcing plan that drives down product costs, some of your vendors and suppliers may be able and willing to take on some of the costs your incur from your company’s outsourcing expenditure.

Consider this a long-haul approach, and only talk to your most trusted and necessary partners when presenting such a topic. According to, “some vendors that are keen on getting the project might be willing to absorb the entire transition expense.”


Make sure to take advantage of business strategies to cut down on outsourcing expenses. Labor costs can be greatly reduced by continuous improvement strategies in design and manufacturing outsourcing.  


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