In today’s highly complex management system, the most of the companies are trying to reduce the burden of the board and of the management so that they can focus on the actual goals of the organization. For these benefits and ease of doing work for board, most of the companies have outsourced the other line of associated to the third parties. In other words, the third parties that are associated with the business, they help the businesses to achieve their objective by taking the major work burden to their own. Like in case of an online store company, it has associated its business with the third party for taking the delivery of the goods. In this way, the online store can only focus towards getting more and more orders and have a better marketing and prices strategies.
Now these third party companies are working of the same phenomena i.e. reducing their work load and thus hire another sub contractor to do the work that they are supposed to do. This leads to the tail and it has also been observed that sometimes there are about 5 to 6 sub contractor companies that are associated with the one main company and each contractor along with the third party is getting commission but transferring the work load to the others. This element and aspect is very risky for the businesses due to the following main reasons.
Increase in cost: When there are more and more sub contractors that are associated with the third party and each contractor and third party itself would be requiring their commission by conveying the massage that they are actually handling the work load whereas in actual they are not. They are actually charging for again transferring the work to other. In this way as each and every would be demanding their commission, the cost of the production would also be increased and the same would impact in increasing in the price. For example, in case of delivery, if two or more sub contractors are hired by the third party then each will charge the delivery charges and in this way the delivery charges would get doubled or tripled, thus price of the product for consumers would be increased. In addition, it will also affect the business as if they charge higher prices; they would not be able to get better business from the market.
Ineffective service: Due to higher number of sub contractors, the service will also be affected and shifting of work load actually reduces the efficiency of doing business. Normally these sub contractors associated with the third party, they are small contractors which do not have the actual resources that the third party had, thus results in inefficiency of the services which ultimately have to suffer by the company.
Lack of interest: The subcontractors that are actually associated with the third party, they do work only for third party and they have no idea whose actual work it is. In this way, they don’t have any interest with the main business that is actually taking all the pain of risk and doing business in the market.
Final words. In order to minimize the third party risk so that the work is not again forwarded to subcontractors, the firm requires to be keep in touch and have a closure eye to whether the work is being done by third parties their self or not. In a survey conduct, about 50% company management is aware that their third party companies has shifted their workload to the subcontractor, yet they do not respond to such because they think that their work is being carried out whether by third party or by sub-contractor so they seems less bothered with the execution. But they need to have fully aware of risk that could be facing by their business with these actions of the third party.