Why Subcontracting ?
There are many value-adding reasons for entering into a subcontract. A subcontract order is an excellent option when a project’s essential skills are too diverse to be handled by the business itself or by one general contractor. The general contractor may also be able to reduce overall project risks and costs by subcontracting project components that fall outside their core skills.
It may also happen that you have a major government contract or contract with a significant impact on a local community. In this case, too, you may require the main contractor to hire a specific number of local subcontractors.
Subcontract manufacturing by using the services of subcontractors or freelancers, lowers the total cost incurred by a company, that it would incur otherwise, by employing a full-time worker.
Since contractors do not fall under the list of permanent employees of your business, you are not responsible for their compensation benefits. You also need not worry about other employee costs such as car and general liability insurance, health insurance, full-time wages, or taxes.
Benefits of Subcontracting
Subcontracting can assist you to outsource certain processes, relieve your workload and help you to run your business smoothly. Here are the key benefits of subcontracting:
Flexible contract duration
The process of subcontracting in operations management allows you to delegate time-consuming tasks to those capable of completing them efficiently. Additionally, it allows you to focus on more specialized and complex jobs that need your attention and supervision internally.
Increased focus on core business functions
The process of subcontracting in operations management allows you to delegate time-consuming tasks to those capable of completing them efficiently. Additionally, it allows you to focus on more specialized and complex jobs that need your attention and supervision internally.
Reduces capital expenditure
When you assign certain tasks as subcontracts, you don't need to purchase all the equipment and material required to complete those processes. This reduces capital expenditures to a great extent.
In addition, as discussed above, you can also save on full-time employee benefits and vacation time. Moreover, subcontractors are responsible for their own time schedules and do not require your supervision. This is an important area of value, as this saves precious business time for you and your team.
Better use of existing resources
It might get challenging and tricky for your business if you try to multitask and expect your staff to excel in all operations in-house. You might lose important time on lengthy and unimportant activities, and you may also end up using more resources than required. By delegating certain tasks to other contractors who specialize in that particular segment, you can ensure that your existing in-house resources are used more efficiently and in the areas that are more value-adding.
Subcontracting Process
Onboarding a subcontractor for the first time can seem complex, especially without the support of a trusted vendor or software. The subcontract work processes listed below will give you a head start:
Inform and prepare your staff.
When it comes to the involvement of new sub-contractors, businesses may face resistance from workers who are unwilling to coordinate with external job workers. Therefore, get your in-house workers onboard about the plans to outsource work and inform them of the reasons for it.
This step is also essential to get inputs on which tasks can be delegated to third parties. It will ensure that workers feel a part of the process and are updated with all current and upcoming tasks.
Contact prospective subcontractors.
This stage involves reaching out and connecting with prospective subcontractors, formally or informally, and inquiring about the services rendered and contract terms. Before finalizing a subcontractor, all details should be discussed clearly like inclusions of the project, duration, payment rate and terms, and other clauses.
Negotiate a contract!
After choosing a subcontractor, it's time for you to negotiate a contract to establish a successful working relationship. The intent and goals of both parties from this subcontract should be evaluated through a set of questions.
The document will list the financial incentives that a subcontractor will receive upon completing the project and explicitly specify roles and performance standards.
You should also outline who will control the rights to any new concepts, innovations, or materials produced during this agreement. Further, describe how you can modify the subcontractor relationship, such as how to renew, cancel, or terminate it.
Assess your needs.
It is critical to evaluate your company's needs to assess the scope and requirement of external assistance. Next, you must choose which specific jobs or projects to outsource, and select what kind of subcontractor would be most effective.
Introduce the contractor to your employees.
Once the contractual relationship is in action, introduce the contractor to important workers within your organization. It's critical to make arrangements to obtain regular updates on the subcontractor's progress on the current project.
Based on these updates, you should provide regular feedback for required changes during the project, and provide closing feedback on the subcontractor's performance when the project is over.
Maximize Business Productivity By Subcontracting
Subcontractors with good work ethics can significantly contribute to the success of your business. They help you to seamlessly complete large projects, and unexpected seasonal requirements, while also extending operational support when you have ad hoc shortages.