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The people in China understand the outsourcing concept
much better than we think.
Let me share a story.
A few years ago, I visited Beijing for the first time.
At the airport there, I got into a taxi and paid 450 yuan (about S$100)
to get to the city. To my horror, I later found out that the normal
taxi rate for the same distance was 60 yuan!
Because of this bad experience, I became more careful
whenever I took taxis in China.
Once Bitten Twice Shy
Another time, I needed to go to Suzhou from Beijing.
My local friends advised me to take a plane to Shanghai airport and
catch a taxi from there. After my earlier experience, I checked with
my Chinese friends for the taxi fare from Shanghai airport to Suzhou,
and was told it should be around 400 yuan.
Armed with this information, I confidently arrived
at Shanghai airport and immediately looked for the taxi stand. There
was a middle-aged man holding a placard, with "Suzhou, Wuxi"
written on it, standing at the gate, chanting his mantra to every passerby
"Suzhou, Wuxi 200 yuan".
That caught my attention! I wanted to go to Suzhou
and this was half the normal price! I checked out the man - he looked
pretty decent and I reckoned it's a good deal. Why not accept the offer?
So I did.
The Journey
The man carried my luggage to his car, drove me to
a nearby spot and asked me to wait. Five minutes later, he came back
with another car and another driver. He explained to me that he did
not have the license to drive in Suzhou and had asked his friend to
help.
Before parting, I paid him 200 yuan and confirmed with
the new driver that he would take me to Suzhou. I transferred my luggage
to the new car.
During the trip while chatting with the driver, I realised
that he was on the way home to Wuxi, bypassing Suzhou. The man who had
"contracted" him had paid him 50 yuan.
His car stopped outside the city of Suzhou. He explained
to me that he was not familiar with the roads within Suzhou and would
help me get a taxi. Within a few minutes, he managed to flag down a
taxi, told the taxi where I wanted to go, paid the taxi driver 10 yuan
and transferred my luggage.
The journey was uneventful and I arrived safely at
my hotel, on time to meet my customers.
The Biggest Winner
There are 3 persons in this value chain.
The man at the airport provided value to me by offering me a solution
to meet my needs at half the normal price. He made his money by outsourcing
the "production" to the Wuxi driver, who could do it at a
cheaper cost.
The Wuxi driver "outsourced" to the Suzhou
taxi driver for the same reason.
The airport man earned 150 yuan.
The Wuxi driver earned 40 yuan.
The Suzhou taxi driver earned 10 yuan.
And I? I was the biggest winner because I saved 200
yuan!
Lessons Learnt
What lessons can we draw from this experience? For
me, I learnt two lessons:
1. Know your current costs of operations.
It helps if you can decide if outsourcing is cheaper.
If you cannot put a price tag on your current operations such as payroll
or leave processing, you won't be able to compare or decide if the alternatives
are better. I would not have accepted the offer if I had not known that
the normal taxi fare from Shanghai airport to Suzhou was 400 yuan.
2. Focus on your core business, leverage on others'
strengths.
Instead of taking the risk of getting lost in Suzhou
city, the Wuxi driver decided to "outsource" the trip to the
local taxi driver. If the man at the airport had decided to drive to
Suzhou and back, he might not have made as much money. He might also
have lost the opportunity to clinch a few more deals.
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