Everyone knows the finance is stretched for business start-ups and therefore many look to sourcing supplies from overseas in order to save on costs.
The types of items which can be created abroad and shipped to the UK vary from websites to furniture where the wage rates can be lower and there exists a strong willingness among businesses in these countries to engage with foreign customers.
The charge to source supplies from overseas was lead by what some see as the call centre revolution, where sales and support functions of UK companies were set up in English speaking counties such as India. The new availability of 24 hour a day telephone hotlines were certainly welcomed by customers.
India in particular and many of the Eastern European block countries have embraced the opportunity presented in the new global business climate and have readied themselves to provide efficient services.
Costs Savings
So just how much can be saved by obtaining a service from abroad as opposed to in the UK? The answer depends on the service of course, but as an indication, where the facilities are readily available in the overseas country, UK businesses could expect to pay anywhere from a fifth to a tenth of the normal price.
As with any deal, the business start-up should seek to negotiate the best deal they are able based to the relative strengths of the buyer and seller.
Problems with Sourcing from Abroad
Although the costs savings might be significant, there are potential problems with sourcing from abroad. Some of these are described below:
Language Barriers
Language barriers can hinder attempts to provide a detailed specification and have it satisfied both accurately and on time. Whilst the quality of English spoken by those abroad is often superior to that a UK resident person would deliver, the use of slang and colloquiums should definitely be avoided.
The chances of misinterpretation can also be minimised by frequent reviewing the work as it is carried out and highlighting any areas which appear to be incorrect.
As the relationship between the UK business and the supplier abroad becomes better established, the communication gap should in theory close and give rise to speedier and more efficient projects completed.
Time Differences
Time differences between the countries where the UK business is based and where the supplier is resident can cause issues where frequent telephone of email communication is an integral attribute for a successful project completion.
India, for example is seven hours a head of the UK and so when we start work at nine in the morning, they are half way though their business day.
Misalignment of local time zones can have its advantages however as when we wake up, the instructions given on the previous day might have been already implemented and ready for checking.
A great many entrepreneurs typically work long hours especially when they start a new business. Thus, if one or both parties are willing to work past the traditional office hours of nine to five, then the time differences become less of an issue.
European countries are more closely aligned to the UK time zones and thus a maximum of one or two hours will be outside the synchronisation window.
Quality of Work and Materials
The quality of work and the materials used are not normally an issue as both can be specified at the inception to the agreement. Depending on the specific project however, any important factors relating to the actual techniques which should be employed during the creation should be detailed and highlight as central.
Payment for Work
Transfers of money abroad can be arduous and time consuming task requiring a visit to the bank and filling in several forms in triplicate. Given the nature of the resource needed to pay a foreign supplier, it might be tempting to make fewer large progress payments instead of numerous smaller one.
The danger here however is that the promise of payment in the future is a strong motivator for current performance and the removal of this incentive by paying too much upfront might diminish the supplier’s sense of urgency towards their side of the deal.
UK business start-ups should consider more modern electronic forms of transferring funds such as through PayPal, where all that is required is a bank account and an email address.
Using such methods can facilitate funds transfers in minutes from the comfort of one’s own desk and provide immediate confirmation that the transaction has been successful.
Conclusions
There are several areas of business where providers overseas are able and willing to complete assignments for significantly less money than that which a UK based company would demand.
Appropriate caution, perhaps beginning with smaller projects could be used to assess whether a proposed relationship is a viable one. Once confidence and a working partnership have been established, more sourcing from the overseas suppliers can ensue.