Subcontracting — a growth industry
| Published date | 01 September 1981 |
| Pages | 27-28 |
| DOI | https://doi.org/10.1108/eb057215 |
| Date | 01 September 1981 |
| Author | Nick Robinson |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Subcontracting
—
a growth
industry
by Nick Robinson
Subcontracting has long been an integral part of most
manufacturing organisations - whether for individual
production jobs or for maintenance and cleaning - or
even for the entire manufacturing process. And the sub-
contract option is becoming increasingly attractive, so
that now virtually any task can be undertaken by one
subcontractor or another. But getting value for money
takes a keen eye to spot the reputable operator, with
adequate resources - whether for a subcontract services
or production work. Take the Crook-based company
Marshall Richards Barcro. Having closed its entire
manufacturing facility in 1977, the company has made
extensive use of subcontractors to produce its range of
tube processing and wire drawing equipment.
Nigel Charles, MRB's commercial director, admits
that selecting subcontractors isn't always easy. "While
we investigated them all thoroughly we ignored one vital
thing - whether the subcontractor had his own product
or was tied inextricably to another client. If a sub-
contractor is manufacturing his own product, he may
well be able to cater for clients' needs while there is a
lull in demand for his own product. The danger is that if
,he suddenly hits a peak of demand, the client's work
will be pushed aside. Equally, if the subcontractor is
tied to one major customer, you will be alright while
that customer's requirements are not great - while, say,
his business is in a trough. But once he hits a peak again
your work will no longer take precedence."
A manager, usually on a tight
budget, is expected to work
maintenance miracles during
the two-week annual shut-down
However, finding the contractor with adequate
resources to meet any conceivable demand from your
company can pay off. Take for example, maintenance.
Here a manager, usually on a tight budget, is expected
to work maintenance miracles during the two-week
annual shutdown. Contractors can offer an answer. For
example, contractors do not increase the size of the fac-
tory maintenance establishments, so long-term savings
can be made on wage bills. Moreover, you can also save
on capital for special tools and equipment which the
contractor provides. In addition, the specialist contrac-
tor, intent on establishing a worthwhile business, will
employ only reliable staff with proven experience and
the relevant trade union membership. And putting work
out to maintenance contract allows permanently-
employed staff to concentrate on the specific plant of
special interest to full production. This can improve job
satisfaction - and promote better labour relations.
Cleaning is another area where subcontractors have
proliferated and where the best contractor will not
necessarily be the cheapest. The shrewd manager will
compute what it would cost him to employ his own staff
for the task - and to kit them out. It's often those ancil-
lary costs that add up.
Of course, reputable cleaning contractors - and for
that matter any subcontractor who is likely to be work-
ing on your premises - will provide employer's and
public liability, and theft and damage coverage to
client's property. They will also relieve a company of
the cost - and liability under employment laws - of
recruiting, screening, training, absorbing and controlling
new employees for short-term or periodic work.
"We've found that companies deliberately try to
operate at a level which will accommodate normal busi-
ness,
but not the peaks of demand," confirms Judith
Harper, commercial adviser at the Engineering Emp-
loyers Federation. "When these peaks occur, manage-
ments will tend to opt for subcontractors. Furthermore,
because companies are finding it increasingly difficult to
recruit suitably qualified skilled
staff,
they are turning to
subcontractors."
Legislation has proved to be another potent force in
contributing to the growth of subcontractors. First,
employment legislation has made it difficult for emp-
loyers to "hire and fire" to cope with fluctuations in
demand, caused either by the cyclical nature of the
economy or by seasonal factors. Indeed, because
economic cycles tend to be more extreme and shorter in
the UK than in other industrialised nations, capital plant
manufacturers routinely meet enormous problems in
balancing workloads against labour force. Secondly the
health and safety laws impose increasingly stringent
requirements for protecting workers in hazardous pro-
cesses. It can often be more economic to let the con-
tractor provide these safeguards, although both client
and contractor share the responsibility for the health
and safety of the contractor's employees working on a
client's premises. So watch out for those quotes that
undercut others by miles; they could be cutting the cor-
ners by skimping on safety.
Some companies have travelled a long way down the
subcontracting road - Marshalls Richards Barcro have
rid themselves almost totally of what one manager refer-
red to as the "manufacturing monster". They rely
instead on subcontractors for every aspect of produc-
tion except design.
Another example is Middlesborough-based Head
Wrightson Machine Co Ltd, whose purchasing manager
SEPTEMBER/OCTOBER 1981 27
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