Opinion: Outsourcing — Trucking’s Elephant in the Room

By Jennifer Aliengena

President

Aliengena Inc.

This Opinion Pice appears in the Aug. 25 print edition of Transport Topics. Click here to subscribe today.

The transportation industry is in a dangerous place, one where even well-known industry players such as Jevic Transportation, which closed its doors in May, and Jim Palmer Trucking, which filed for Chapter 11 bankruptcy protection in July, can go under — taking their employees with them.

There still are ways transportation companies can save money and get through the current economic crisis, but one of the best options is often the one least mentioned in polite trucking company, much less considered: sending noncore work out of the United States. No matter what you call it — overseas staffing, offshore staffing or simply outsourcing — it can be a solution for what ails many transportation companies today.

Why is overseas staffing so taboo? In large part, it’s because the transportation industry is among the most patriotic in the country. Nevertheless, we are living in a global economy. Every day, goods move into the United States from other lands, many of them riding on trains and trucks built in other countries. In some cases, even the fuel used to run the vehicles comes from another nation.

So why it is unpatriotic to look at creative ways to keep your company afloat? And why is outsourcing such a scary term in an industry that relies on global commerce?

The biggest fear among many in the transportation industry is that staffing elsewhere means relinquishing things fundamental to their business and their principles. But today’s overseas staffing options are different.

Overseas staffing has worked in many other industries — and quite well. Software industry help-desk support, airline reservations or retail operations’ phone or online purchasing are some examples of industries saving money through outsourcing.

While there is no doubt the transportation industry works differently from a computer company or an airline, outsourcing can work in transportation, too. The key is retaining core competencies in-house and sourcing out the things not central to the business, such as accounting functions, tax-return preparation, software development, billing and collections. These are all important functions, but they don’t depend on having a strict expertise in transportation. In fact, most people who work at those functions in transportation could as easily work in hospitals, insurance agencies, manufacturing facilities, banks or other industries. That’s because the work they do is more about the function rather than the industry in which that function is performed.

Transportation companies thinking about outsourcing should take a hard look at their business and determine which elements are essential to staying competitive and which are not.

For a firm that specializes in freight transportation, for instance, the dispatchers, safety officers, brokers and drivers are critical, core elements. The rest is potentially up for grabs.

Overseas staffing makes sense when dollars are tight because companies can see upfront how much they will save. For example, if a company could cut a salary in half and eliminate benefits for each job it outsources, it might be worth considering.

Using a highly trained, English-speaking staff in a country with a strong technology infrastructure, such as India, means salary costs are substantially lower without sacrificing quality. With overseas staffing, companies can add or remove people quickly and easily as their needs fluctuate, allowing them to better weather the industry’s vicissitudes. They also save on salaries, taxes, insurance, vacation time, overhead and infrastructure costs.

For an employee earning $15 per hour in the United States, the benefits and other items can easily tack on another $6.50 or more per hour — bringing the $31,200 base salary up to $45,000. The same job in India could cost between two-thirds and one-half that amount.

By shifting just 10 jobs offshore, a company could save hundreds of thousands of dollars annually. Savings like that make the discussion about overseas staffing important. Are there downsides to overseas staffing? Of course there are. One of the most often cited drawbacks is fear of the unknown: Will my customers notice if I use offshore staff? Will they care? How can I coordinate schedules with people working in India? Am I giving up too much control to people who have never visited my corporate headquarters?

Those looking to save money should fully understand their overseas staffing arrangement before signing anything. Ask questions: Is the company providing the outsourcing knowledgeable about the freight transportation industry? How much money can I save by moving certain jobs offshore? Does the overseas staffing company have a U.S.-based contact for my day-to-day needs? If I am dissatisfied with an overseas resource, will my outsourcing company remove that person from my team? How quickly can my team be ramped up or down to accommodate my changing needs? Can I outsource just one job? Will my outsourcing provider work with me to help determine the best mix for me and ensure that I can retain all my core competencies in-house?

There are few things more patriotic than keeping America’s small companies alive and, if overseas staffing makes the difference between surviving or going under, take a hard look at that elephant in the room and start talking about it. It just might save your company.

Aliengena Inc., Heber City, Utah, provides overseas staffing services.