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Outsource magazine: thought-leadership and outsourcing strategy | September 23, 2017

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Critical business costs are no longer ‘people costs’

Proxima
  • On January 18, 2013
  • http://www.proximagroup.com

Partner-supplied content

The rate at which business has changed has accelerated over the past 10 years. Progressively, organisations that used to make or do everything themselves have started a journey in which sees them doing less and less themselves – instead, using and integrating their suppliers’ capabilities in with their own more and more.

A good example is the car industry, in which manufacturers used to have their own coal mines, iron ore mines, steel foundries, rubber plantations etc. Nowadays, they buy pre-manufactured seats, electronics, audio equipment, tires – which are then simply assembled by the auto manufacturer.

Another example is Apple, which literally makes nothing themselves.

This trend has crept up on many businesses. Once upon a time, the people who sat around you every day were the key contributors to business costs. But according to our recent research (http://info.proximagroup.com/ten-billion-profit-opp-webinar), the critical costs are actually not the people but rather the complex network of suppliers and relationships that a business has. The labor portion is a very visible portion of a businesses’ cost base which business leaders seem to target and focus on heavily. Reducing these costs has happened over the past 3 years, however the situation today is that all the quick /easy ones have been done in terms of labour costs and in fact if leaders continue on this trajectory they will have no people left in the business in a decade.

If you want to make dramatic changes to your business, you have got to look elsewhere.

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