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Done By: Neha Rajpal

S.Y.BBM-IB. Roll No: 55

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Subcontracting is a type of work contract that seeks to outsource certain

types of work to other companies. This is a step down from general

contracting, which is a contract overseeing a much broader project in

many cases.

Subcontracting is done when the general contractor does not have the

time or skills to perform certain tasks.

When a building is being constructed, subcontracting becomes a major

deal.

Larger contractors may be able to handle the plumbing and electrical work

as well, without subcontracting. However, these companies are rare notonly because of the expertise involved, but the desire to focus primarily in

one area.

If a contractor has too many disciplines, the thought may be that it is not

clearly focusing its efforts on quality in one particular area.

In some cases, a general contractor may only be used as the constructionmanager or supervisor. In that case, subcontracting accounts for all of the

physical work done on the premises.

The general contractor's only responsibility is to approve the contacts,

keep the project within budget and inspect the work.

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Subcontracting, while prevalent in the construction industry, is also

used in a number of other industries.

Subcontracting is also important for manufacturers making anumber of products from complex components.

Subcontracting offers a number of advantages:

First, it allows work on more than one phase of the project to be

done at once, often leading to a quicker completion.

Second, because subcontractors already have the expertise and

equipment to provide the service. it is often much cheaper for them

to do the work than a general contractor who may not have that

special expertise.

Finally, the subcontractor is usually able to work with a general

contractor on more than one project, thus creating a savings for

both in the long run as a relationship is formed.

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THE BENEFITS OF SUBCONTRACTING TO MAIN CONTRACTORS:

A. Cost reduction: There are a number of reasons motivating companies to

subcontract as part of a new mixture of overlapping strategic priorities.

B. Higher Quality: Secondly, the search for higher quality products with high

reliability in a growingly sophisticated environment pushes companies to

subcontract.

C. An efficient mechanism to respond to demand fluctuations: Thirdly, the

availability of products/raw materials is an additional reason why companies

decide to source internationally.

D. Accessing regions with potential growth prospects: Finally, international

subcontracting offers commercial opportunities by penetrating markets with

growth prospects.

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THE BENEFITS OF SUBCONTRACTING TO SUBCONTRACTORS:

A. Higher productivity and efficiency: The benefits of subcontracting are also

plentiful for subcontractors, especially those of developing countries.

B. Economies of scale: By concentrating on a single and specialized activity or

discipline, subcontracting service providers can gain economies of scale

whilst at the same time further the cost advantages they offer to original

equipment manufacturers (OEMs).

C. Technology transfer: Subcontracting arrangements act as very efficient

mechanisms and tools for the technological enhancement of small and

medium-sized enterprises. By engaging in an active collaborative

agreement with specific customers, suppliers and subcontractors benefit

from a large amount of technology transfer.

D. Risk mitigation: The most recent thinking concerning subcontracting

relates to risk mitigation. It is argued that one of the reasons for

engaging in subcontracting arrangements is rooted in the need to reduce

business risks.

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THE INDUSTRIAL SUBCONTRACTING AND

PARTNERSHIP EXCHANGE (SPX) OF PUNE has a widevariety of 359 subcontractors and suppliers registered inits database. The breakdown is as follows:

1) AutomotiveComponents(10)

2) SheetMetalIndustries-PressParts(56)

3) MachiningIndustries(44) 4) ForgingIndustries(11)

5) CastingIndustries(11)

6) MetalWorkingIndustries(65)

7) ManufacturingofMachinery&Equipments(53)

8) RubberIndustries(27) 9) PlasticIndustries(29)

10)Electrical & Electronics Industries (50)

11)Miscellaneous (3)