Outsourcing development in woodworking companies: a comparison of Russia and Sweden

Abstract: Outsourcing is increasingly recognized by businesses, universities and
economists worldwide as a new management science. We can source out the work
because there are others who can do it cheaper, faster and better.
Outsourcing is the act of transferring the work to an external business
partner. Outsourcing application might act as a good criteria that can be
applied when comparing Russian and Swedish woodworking companies.
The Russian woodworking industry is currently developing rapidly. The
Swedish industry has a significant experience in forestry development. The
Russian wood house industry has a good opportunity to study Swedish
experiences in order to avoid making the same mistakes in the future.
There are many reasons driving to use outsourcing. Most of them are studied
in the work and can be grouped into three main factors: 1) cost savings, 2)
access to resources, and 3) knowledge, focusing on the business core.
Within Master’s thesis work different types of Swedish and Russian companies
were compared. It is quite challenging to compare those companies according
to their production volume, turnover, and number of employees and so on.
Report describes wooden house manufacturers, sawmills, machinery designing
company, as well as pulp and paper mill.
Russian and Swedish investigated companies have similar off-site onshore
outsourcing application, where the vendor conducts work at its location, but
in the same region as the client company, for example, in the case of the
subcontracting of window and door production. Swedish companies use on-site
outsourcing as well, whereas Russian companies don’t use it, because they
aspire to produce materials by themselves without outsourcing application.
Russian small- and middle-size companies usually don’t use outsourced
workers from the professional employee organizations a lot. Big companies
like “Mondi Syktyvkar” hire subcontracted people from other organizations,
but it is not a typical practice among small and medium size companies in
Russia. There is not such a well-structured employee leasing market in
Russia.
Swedish companies seek to use outsourcing with an aim to reduce net cost of
production. Other companies can produce windows, roofs, doors and other
components more efficiently and cheaper by focusing on their own core of
business. Outsourcing for house manufacturers enables focusing on component
assembling, for instance. Developed market of leasing the people helps the
companies to be flexible and more effective during market downturns. Swedish
woodworking companies buy different components externally, whereas Russian
companies try to produce components internally.
The question of outsourcing application development leads up to the question
of infrastructure and market development. Russian way of business differs a
lot from Swedish one, but both of them can be effective in their own
countries. It is challenging to apply Swedish way of business to Russian
market because of different marketing, economical, political, labour
conditions and vice versa.
Within the Master’s thesis current challenges of outsourcing development in
Russia and Sweden have been analysed. The global financial crisis and
increases for custom duties were also studied.