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Published On: Fri, Mar 8th, 2019

Why do automotive companies hire third party companies?

Automotive companies often prefer to hire third party providers to manufactures the parts they need in the construction process. They choose to hire professionals when it comes to handling specialised projects or when they need a certain type of part for building a vehicle. Sometimes it is no reason to spend resources on a thing another company does, and they do it better than you would do if you would start a new department now. Actually, automotive companies prefer to work with third-party firms because they have benefits in terms of efficiency, cost and quality.

There are multiple ways in which a subcontractor can bring benefits to an automotive business.

photo/ Torsten Dettlaff

A third party provider can prove an effective help when handling large companies

When launching a new line of vehicles automotive companies find the project complex and they take advantage of all the help they could get. It is no worth to start producing certain metal parts when another company is already specialised in doing it. A subcontractor will prove to be a valuable partner in this type of scenario and they would allow the automotive company to manufacture more vehicles and get more clients. Third party providers are considered the additional help all companies are looking for when they need to produce a large number of products in a limited period. Also, a subcontractor is a helping-hand when the automotive company wants to bring on the market a customised model and they need to design a limited number of parts.

A subcontractor is affordable to hire

When starting a new project automotive companies find more cost effective to hire a subcontractor than hiring full-time employees. This solution also helps them prevent risks, because they are collaborating with an expert in the industry that produces metallic parts as their main activity. The third party provider has experience in the niche they are working and they are offering only high-quality products. In the majority of cases, it is cost effective to hire a subcontractor to do a certain job, because the automotive company does not have to pay employee taxes, a full-time salary or to purchase new equipment. At the end of the day hiring a third party provider helps the automotive brand be with around 30% more effective than if they would hire a new team.

Subcontractors have expertise in the domain there are working

Sometimes the employees of an automotive company do not have the same knowledge when it comes to metal parts as the workers of a metal pressing and forming company. In this situation rather than sending them to further training, the automotive brand prefers to work with a subcontractor because they know that this activity is part of their mundane tasks. By outsourcing the job, the employees will be able to focus on their projects and they will complete their tasks faster and better.

The automotive brand does not have to make a long term commitment

When starting a new department the automotive brand has to guarantee the employees a permanent or at least a long term job if it wants to form a team.no one is interested in taking a job that will last only for a couple of weeks or months. Hiring a subcontractor offers the automotive company flexibility, because it does not have to hire permanent workers. They hire a third party business to work for them on short term, and provide them the metal parts they need to build their vehicles.

In the majority of cases, this type of partnership transforms into a lifetime business relationship. If the provider of metal pressed parts proves to be reliable and they offer high quality products the automotive company will definitely hire them again when they will need help with a similar task.

When hiring full-time employees it is quite complicated to end the relationship with them and it can lead to extra costs and time. In the majority of cases ending the relationship with an employee leads to legal disputes and this is the last thing an automotive business needs. It is no worth to pay someone, who can no longer serve the company.

Third party companies have knowledge in their field

There are times when automotive companies need to build certain vehicles that require the knowledge of a qualified specialist when it comes to designing certain metal parts. If the business does not have an employee who has that knowledge then the best solution is to hire a third party company that is specialised in the field. Considering that the project is a short term one, and the brand will produce only a limited number of vehicles, it is preferable to hire a short-term specialist. It is important for the third party company to be flexible and reliable for the automotive manufacturer to get maximum benefits.

The automotive company has fewer legal obligations

From the legal point of view, the third party company is the owner of their business and they operate it on their terms. They do not have to take the same legal protection measures for their employees as the automotive business does. For the automotive company this means that they have no obligations to their subcontractors’ employees.  They do not have to pay taxes and deductions to the government; they only have to pay the fee for the products they purchase.

Hiring a third party provider strengthens business ties

Some companies feel that they will be able to sell more vehicles in a certain country if they will decide to hire a provider from that region to deliver them metal parts. They choose to cooperate with an international business in order to pursue their shared goals to reach new clients and to sell more products. Collaborating with a company from another region or country can strengthen the relationship between two industries, two countries and even between two governments.

Both large and small automotive companies rely on their subcontractors to provide them the essential parts to build their vehicles. There are countless reasons why subcontracting works the best for them and the above ones are only the main ones.

Author: Cynthia Madison

On the DISPATCH: Headlines  Local  Opinion

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