Outsourcing: can boost profitability.

The newest buzz word in business is outsourclng. Funds spent on it are expected to reach nearly $300,000,000.000 annually by the year 2000. When used properly, outsourcing can enable a company to reduce costs and create a competitive advantage. According to one senior management consultant, it can make or break many companies when times get tough.

When business is booming, the temptation is to hire more staff, build a new factory or warehouse, and bring more of the business in-house in hopes of better controlling costs. In many cases, companies should be doing exactly the opposite, says Donald J. Fletcher, president of management consultants George S. May International Co., Park Ridge, Ill. "Inventory, facilities, even people have a price tag attached to them. You don't want to own a building or pay a salary year-round when you only need the person or facility part of the year. Fixed costs are a financial drain on companies, particularly those that are growing rapidly and need good cash flow."

The explosion in the outsourcing market makes it possible for many business owners to realize dramatic cost savings. Fletcher encourages clients to review the following areas:

Staffing, The use of independent contractors provides employers the flexibility to hire when and for as long as they need. As international commerce expands--as welt as business on the Internet--there is no such thing as a nine-to-five workday. Outsourcing of staffing increases a company's reach dramatically and enables it to avoid costly benefits.

Capabilities. Outsourcing enables even the smallest firm to have access to a marketing expert, researcher, or another specialist. While it may not pay to "own" that person, a company can "rent" that expertise without adding to...