Making Strategic Sourcing Decisions: In-House vs Outsourcing
When faced with operational decisions, businesses must carefully evaluate whether to keep functions in house vs outsourcing them to external providers. Here's a quick comparison to help you decide:
| Factor | In-House | Outsourcing |
|---|---|---|
| Cost | Higher initial investment (125-140% of salary costs) | Lower upfront costs, pay for services as needed |
| Control | Full oversight and direct management | Limited control, dependent on vendor performance |
| Expertise | Builds internal knowledge, may lack specialized skills | Access to specialized talent and experience |
| Scalability | Limited by hiring capacity and resources | Highly flexible, can scale up or down quickly |
| Quality | Consistent with company standards, easier to monitor | Varies by provider, requires clear SLAs |
Deciding between keeping operations in-house or outsourcing them is rarely straightforward. The choice impacts everything from your bottom line to company culture, making it one of the most significant operational decisions business leaders face today.
In-house operations give you complete control—your employees work directly for you, understand your company values, and are fully dedicated to your mission. However, this approach typically comes with higher costs, as you're responsible for salaries, benefits, training, equipment, and workspace.
Outsourcing, on the other hand, allows you to delegate specific functions to external specialists. This can significantly reduce costs while providing access to expertise you might not have internally. The trade-off? You sacrifice some control and may face communication challenges or quality concerns.
I'm Mortuary Cooler, with over a decade of experience helping funeral homes steer in house vs outsourcing decisions for their operational needs, particularly in specialized equipment management and maintenance. My work has shown that the right sourcing strategy depends on your specific priorities, budget constraints, and long-term business goals.
In house vs outsourcing vocabulary:
What Is In-House vs Outsourcing? Core Differences
The fundamental difference between in-house operations and outsourcing lies in who performs the work and where the accountability resides. This distinction affects everything from costs and control to quality and company culture.
Understanding "in house vs outsourcing" in modern business
In today's interconnected world, the in house vs outsourcing decision has evolved dramatically. Digital change has virtually erased geographical boundaries, opening doors to global collaboration that was unimaginable just decades ago. Meanwhile, specialized expertise has become both increasingly valuable and challenging to maintain under one roof.
The numbers tell the story: recent industry surveys reveal that over half of executives (52%) now outsource critical business functions like Legal, Tax, and HR. Even more telling, a whopping 76% rely on external partners for IT needs such as cybersecurity and application development. These aren't just statistics – they represent a fundamental shift in how modern businesses operate and compete.
In-House Defined
When we talk about in-house operations, we're referring to work performed by employees who receive a regular paycheck directly from your company. These team members typically work in your facilities, follow your processes, and embody your company culture.
Having in-house staff means maintaining complete control over how things get done. Your team works exclusively for you, understands your unique needs, and develops deep institutional knowledge that stays within your walls. As one business owner told me, "Our in-house team lives and breathes our values every day – that connection to our mission simply can't be replicated externally."
This approach comes with direct oversight of quality, timelines, and daily operations. Your team members develop a natural alignment with your company culture and mission. However, this control comes with higher fixed costs – you're responsible for salaries, benefits, training, equipment, and workspace regardless of business fluctuations.
Outsourcing Defined
Outsourcing takes a different approach by partnering with third-party vendors who specialize in specific functions. These external providers may be located in your backyard (onshoring), neighboring countries (nearshoring), or across oceans (offshoring). The relationship is governed by Service Level Agreements (SLAs) that outline expectations, deliverables, and performance metrics.
The beauty of outsourcing lies in its flexibility. You gain access to specialized expertise without the long-term commitment of hiring full-time staff. Costs typically scale with usage, meaning you pay for what you need when you need it. For many businesses, outsourcing non-core functions frees up valuable time and resources to focus on what truly differentiates them.
A funeral director I recently spoke with put it perfectly: "Running a funeral home requires wearing many hats, but specialized equipment maintenance isn't my expertise. Working with American Mortuary Coolers for our equipment needs lets me focus on serving families while knowing our technical systems are in expert hands."
This approach does come with trade-offs. Communication can require more effort, cultural differences may arise, and you'll need to develop systems for maintaining quality control at a distance. But for many businesses – especially those with fluctuating demands or specialized needs – the benefits far outweigh these challenges.
Key Decision Factors: Cost, Control, Scalability & Quality
When you're weighing in house vs outsourcing options, four major factors will drive your decision. Let's explore each one to help you steer this important choice for your business.
Cost Breakdown
Money talks, and cost is often the first factor businesses consider. At first glance, outsourcing might seem like the budget-friendly option, but the true financial picture is more nuanced.
For in-house staff, remember the 125-140% rule – an employee typically costs 25-40% more than their base salary. This includes benefits, taxes, training, equipment, and workspace. That $50,000 employee? They're actually costing you closer to $70,000 when all is said and done.
With outsourcing, you'll pay contract fees, but also need to account for vendor management time, quality control, and possible rework if things don't meet your standards. These hidden costs can add up quickly.
One of our funeral director clients in Dallas shared an eye-opening experience: "We thought outsourcing cooler maintenance would save us money. But after adding up travel charges, emergency rates, and the cost of downtime while waiting for technicians, having our own trained maintenance person proved more cost-effective for our busy facility."
Control & Oversight
How much control do you need? This question is fundamental when making your sourcing decision.
Keeping operations in-house gives you maximum oversight – you can directly supervise work, provide immediate feedback, maintain consistent standards, and better protect sensitive data. Your team follows your priorities and timeline, not someone else's.
When you outsource, you trade some control for other benefits. You'll rely on contracts rather than direct supervision, feedback loops may stretch longer, and you'll need to share certain information with third parties. Changing course quickly becomes more challenging too.
As one funeral home owner from our Southeast Region put it, "When handling deceased loved ones, control over quality and dignity isn't negotiable. That's why we keep core services in-house but outsource peripheral functions like bookkeeping and digital marketing."
Scalability & Flexibility
In today's unpredictable business environment, the ability to scale quickly is invaluable – and this is where outsourcing often shines brightest.
Outsourcing lets you rapidly add resources during busy periods and scale back during slow times without painful layoffs. You can access specialized skills for short-term projects without long-term commitments, giving you remarkable operational flexibility.
In-house operations, while valuable in many ways, typically offer less agility. Hiring takes time (about 35 days for specialized roles), reducing staff during downturns is difficult, and physical space limitations can constrain growth. Plus, training for new skills doesn't happen overnight.
We witnessed this during the COVID-19 pandemic. Funeral homes relying solely on in-house staff struggled with the sudden demand surge, while those with flexible outsourcing arrangements adapted more smoothly to the unprecedented situation.
Culture & Employee Morale
The human element matters tremendously but is often overlooked in sourcing decisions. Your choice between in house vs outsourcing can profoundly impact your company culture.
In-house operations typically foster stronger team cohesion, build institutional knowledge, create clear career paths, and reinforce your company values. Your team members feel invested in the mission because they're an integral part of it.
Outsourcing, especially of previously in-house functions, can create uncertainty among staff, reduce engagement if employees fear further outsourcing, introduce cultural differences that affect collaboration, and limit knowledge sharing across your organization.
"We've found our sweet spot by keeping core functions in-house while strategically outsourcing others," explains a manager from our New York location. "Our employees appreciate that we invest in their growth for essential functions while outsourcing tasks that would pull them away from their strengths."
Quality & IP Protection
For specialized industries like funeral services, quality control and protecting your intellectual property are non-negotiable considerations.
In-house operations give you direct quality control with immediate correction opportunities. Your proprietary processes remain confidential, intellectual property stays protected, and you can maintain consistent standards across your entire operation.
Outsourcing introduces potential risks in these areas. Quality becomes dependent on vendor selection and management, your intellectual property may be exposed to third parties, standards might vary across different vendors, and distance can make quality issues harder to spot quickly.
Our production manager explains why we manufacture our mortuary coolers in-house at our Johnson City facility: "We can ensure every unit meets our exacting standards. The superior engineering of our products directly results from keeping core manufacturing processes in-house while selectively outsourcing components where specialist suppliers excel." More info about superior engineering
According to scientific research on outsourcing trends, organizations are becoming increasingly sophisticated in their approach, often adopting hybrid models that maximize the benefits of both in-house and outsourced operations while minimizing the drawbacks of each.
Pros and Cons at a Glance
When weighing the in house vs outsourcing decision, it helps to see the complete picture. Let's take an honest look at what you gain and what you might sacrifice with each approach.
Advantages of Keeping Work In-House
There's something reassuring about keeping operations under your own roof. When you maintain work in-house, you gain complete control over every aspect of your processes. Your team works directly under your supervision, allowing you to make adjustments in real-time and ensure quality meets your exact standards.
Your company also builds valuable institutional knowledge that stays within your walls. I've seen this at American Mortuary Coolers, where our in-house manufacturing team has developed specialized techniques over decades that would be impossible to replicate elsewhere.
"Having our own trained staff to handle our mortuary cooler maintenance means we can address issues immediately," shared a Pittsburgh funeral director I spoke with recently. "In our business, waiting even a few hours for an outsourced technician could create serious problems."
The communication benefits are substantial too. When your entire team works under one roof, collaboration happens naturally. Questions get answered immediately, problems get solved faster, and your company culture strengthens through these daily interactions.
Challenges of In-House
Of course, keeping everything in-house comes with its share of problems. The cost factor is usually the first concern for most businesses. Your fixed expenses remain constant whether you're busy or not. You're paying full salaries, benefits, training costs, and maintaining equipment year-round.
Finding and keeping the right talent presents another significant challenge. About half of executives identify talent acquisition as their top internal challenge, according to recent surveys. This becomes especially difficult for specialized roles or in smaller markets where the talent pool is limited.
The scalability limitations can also be frustrating. During busy periods, your in-house team might struggle to keep up with demand. Conversely, during slow times, you're still paying for the same level of staffing. This lack of flexibility can put pressure on your bottom line and limit your ability to respond quickly to changing market conditions.
Advantages of Outsourcing
Turning to external partners offers several compelling benefits, starting with cost efficiency. By outsourcing, you typically convert fixed costs into variable expenses – you pay for services only when you need them. This can free up capital for other investments and reduce the overhead burden on your business.
The access to specialized expertise can be game-changing. External partners often bring skills and experience that would be impractical or too expensive to develop internally. They stay current with industry best practices because that's their core business.
"Outsourcing our digital marketing to specialists lets us focus on what we do best—serving families during their time of need," explained an Atlanta funeral home owner I work with. "We get better results than we could achieve in-house, at a lower cost."
The flexibility and scalability of outsourcing arrangements can help businesses adapt quickly to changing circumstances. Need to double your capacity for a big project? Your outsourcing partner can often accommodate this without the lengthy hiring process you'd face internally. Need 24/7 coverage? Global partners in different time zones can keep work flowing around the clock.
Risks of Outsourcing
The trade-offs with outsourcing start with a loss of control. When you hand work to an external partner, you're trusting them to maintain your standards and meet your expectations. This distance can make quality assurance more challenging and limit your ability to make immediate adjustments.
Communication challenges are almost inevitable with outsourcing. Time zone differences, language barriers, and the lack of face-to-face interaction can lead to misunderstandings or delays. Building strong relationships takes more deliberate effort when you're not sharing the same physical space.
Security concerns and dependency risks shouldn't be overlooked either. Sharing sensitive information with third parties always carries some risk, and becoming too dependent on a single vendor for critical functions can leave your business vulnerable if that relationship ends unexpectedly.
A Deloitte study found that while 57% of companies cite cost reduction as their primary motivation for outsourcing, many fail to account for these hidden risks that can ultimately increase total costs if not properly managed.
At American Mortuary Coolers, we've found that a thoughtful balance often works best – keeping our core manufacturing expertise in-house while selectively partnering with specialists for certain components and services. This hybrid approach lets us maintain our quality standards while still gaining the benefits of external expertise where it makes sense.
Hybrid Strategies & Real-World Examples
Finding the perfect balance between in house vs outsourcing doesn't have to be an all-or-nothing decision. Many successful businesses have finded that a thoughtful hybrid approach gives them the best of both worlds – keeping critical functions under their roof while partnering with specialists for other needs.
When a Hybrid Model Works Best
The beauty of a hybrid approach is how it can be custom to your specific situation. It works particularly well when you need to distinguish between core and non-core functions. Most businesses find that keeping strategic, brand-defining activities in-house protects their identity and quality standards, while standardized support functions can often be handled just as well (and more cost-effectively) by outside experts.
"We finded that maintaining our design and manufacturing teams in-house while partnering with logistics specialists gave us the perfect balance," says our operations director at American Mortuary Coolers. "Our customers get the quality craftsmanship we're known for, plus reliable delivery anywhere in the continental US – something we couldn't achieve as efficiently on our own."
Hybrid models also shine when you're dealing with compliance and security requirements. Many funeral homes keep their core client-facing services in-house where they can maintain strict protocols, but partner with specialists like us for technical equipment maintenance that requires specialized knowledge.
Businesses with fluctuating demand find hybrid approaches particularly valuable. You can maintain your core team for everyday needs while bringing in additional help during busy seasons – avoiding both the expense of permanent overstaffing and the stress of being shorthanded during peak times.
The automotive finance world offers a compelling example of hybrid strategy success. Ford Credit partnered with fintech company AutoFi to create an in-house financing platform powered by outsourced technology expertise. This smart combination let Ford maintain control over sensitive customer relationships and credit decisions while leveraging specialized digital capabilities they didn't have internally.
Steps for a Cost-Benefit Analysis
Before deciding what to keep in-house and what to outsource, a thorough cost-benefit analysis will save you from expensive mistakes. Start by calculating the true cost of keeping operations in-house – remember that employee costs typically run 25-40% higher than base salary once you factor in benefits, taxes, training, and workspace.
Next, get comprehensive quotes from potential outsourcing partners, being sure to account for contract management time and potential transition costs. Don't forget to quantify non-financial factors like impact on quality, responsiveness, and company culture – these can ultimately matter more than the immediate dollar figures.
"When funeral directors call us unsure whether to invest in their own mortuary coolers or use shared facilities, we walk them through exactly this kind of analysis," explains our Midwest regional manager. "For some, the volume justifies the investment in equipment. For others, especially smaller operations, a different solution makes more sense. There's no one-size-fits-all answer."
Creating scenario analyses with best-case, worst-case, and most likely outcomes helps bring clarity to the decision. Many businesses find their break-even point is different than they initially assumed once all factors are considered.
Mitigating Risks in Either Approach
Whichever path you choose, proactive risk management keeps small challenges from becoming major problems.
For in-house operations, reducing dependency on specific individuals is crucial. We've seen too many businesses struggle when key employees leave, taking critical knowledge with them. Implementing thorough documentation and cross-training provides essential backup for critical functions.
If you're outsourcing, robust contracts with clear Service Level Agreements (SLAs) set expectations from day one. Protecting your sensitive information with Non-Disclosure Agreements (NDAs) is also non-negotiable, especially in the funeral industry where family privacy is paramount. Many successful businesses develop relationships with multiple vendors for critical functions, ensuring they're never completely dependent on a single provider.
"In our business, reliability isn't just about convenience – it's about dignity," notes a Columbia, SC funeral director who partners with American Mortuary Coolers. "Whether you maintain your equipment in-house or work with service providers like us, having backup plans is essential. A cooler failure isn't just an inconvenience—it creates genuine distress for families during an already difficult time."
For both approaches, establishing clear Key Performance Indicators (KPIs) gives you objective measures of success. Regular reviews help identify small issues before they become significant problems, while open communication at all levels builds the trust necessary for long-term success. As the research on data breaches shows, preparedness and transparency are your best protection against the unexpected.
Equipping Your Funeral Home Doesn't Have to Break the Bank provides more guidance on balancing quality and cost considerations specific to funeral operations.
Frequently Asked Questions About In House vs Outsourcing
What tasks are best kept in-house?
When funeral directors ask me which functions they should keep under their own roof, I always emphasize that there's no one-size-fits-all answer. However, certain activities typically benefit from staying in-house:
Your core business operations that define what makes you special deserve your direct attention. These are the services or products that set you apart from competitors. For funeral homes, this usually means the compassionate care of the deceased, personalized family consultations, and ceremony planning that reflects your unique approach.
Activities where you directly interact with customers should generally stay in-house too. These customer-facing moments shape how people perceive your brand and build the trust that's so essential in the funeral industry.
Functions involving confidential information—like family records or financial details—often warrant the improved security of in-house handling. These highly sensitive areas might create too much risk if outsourced.
I've noticed that funeral homes handling higher volumes often benefit from keeping basic maintenance staff trained on routine cooler care, while partnering with our specialists at American Mortuary Coolers for more complex repairs or installations. This balanced approach gives them daily peace of mind while still having expert backup when needed.
When should a company outsource?
In my conversations with funeral directors across the country, I've found that outsourcing works beautifully in several specific scenarios:
When you need specialized technical skills that your team uses infrequently, outsourcing often makes more sense than maintaining that expertise in-house. For example, many funeral homes partner with us for mortuary cooler maintenance rather than developing that highly specific knowledge internally.
Our West Coast representative shared, "Many of our clients in Los Angeles outsource their digital marketing and accounting while keeping their core funeral services in-house. This allows them to focus on what they do best—serving families—while experts handle the specialized functions."
Fluctuating workloads present another perfect outsourcing opportunity. Rather than staffing for peak periods and carrying that overhead during slower times, you can flex external resources up and down as needed.
The industry data backs this up—the most commonly outsourced services include IT support (76% of companies), legal services (52%), accounting (48%), and marketing (45%). These are all areas requiring specialized expertise that most businesses don't need full-time.
How do I protect quality when outsourcing?
Maintaining high standards with external partners doesn't happen by accident—it requires thoughtful planning and ongoing attention.
Start with thorough vendor selection. Take time to research potential partners, check references, and evaluate their work quality before signing any agreements. This upfront diligence pays dividends later.
Be crystal clear about your expectations by creating detailed Service Level Agreements (SLAs). These should define quality standards, response times, and specific performance metrics that matter to your business.
Don't just set it and forget it. Schedule regular performance reviews to evaluate work quality and address any issues before they become problems. These check-ins help maintain accountability and keep the relationship healthy.
"When we provide maintenance services for mortuary coolers across the country, we establish clear communication protocols and response time guarantees," explains our service coordinator. "This gives funeral homes the confidence that they'll receive the same quality they would expect from an in-house team."
I always recommend assigning a knowledgeable internal person to oversee each outsourcing relationship. This designated relationship manager becomes your champion, ensuring the vendor understands your unique needs and standards.
Lastly, invest time in proper knowledge transfer at the beginning of the relationship. The more thoroughly vendors understand your expectations and unique requirements, the more likely they'll meet or exceed them. This initial investment pays off through higher quality and fewer corrections needed down the road.
Conclusion
The in house vs outsourcing decision rarely has a clear-cut answer. Most successful organizations find that a thoughtfully designed blend of both approaches works best, allowing them to capitalize on the strengths of each model while minimizing their drawbacks.
As you weigh your options, keep these essential considerations in mind:
First, look beyond the surface-level comparisons of salaries versus vendor fees. The true cost of either approach involves many factors that aren't immediately obvious. For in-house operations, remember the 125-140% rule—employees typically cost significantly more than their base salary when you factor in benefits, training, equipment, and management overhead.
Second, be honest about what your organization does best. Your core competencies—the functions that truly define your competitive advantage—generally belong in-house where you can nurture and protect them. Supporting functions that require specialized expertise you don't maintain internally are often prime candidates for outsourcing.
Third, consider how your demand fluctuates. If your business experiences significant ups and downs in workload, outsourcing can provide the flexibility to scale resources without the painful cycles of hiring and layoffs. This adaptability is particularly valuable in industries with seasonal patterns or unpredictable growth.
Fourth, assess how much control you truly need. Functions requiring tight oversight of quality, security, or regulatory compliance often benefit from staying in-house where you can maintain direct supervision. When perfect execution is non-negotiable, direct control becomes more valuable.
Finally, don't overlook the human element. Your sourcing decisions shape your company culture, affect employee morale, and influence how knowledge develops within your organization. Sometimes the right choice on paper may not be right for your team's cohesion and growth.
At American Mortuary Coolers, we've built our reputation on specialized in-house craftsmanship. Our mortuary coolers are designed and manufactured by our own highly trained teams in Tennessee, ensuring the quality and reliability that funeral homes nationwide depend on. This commitment to in-house expertise for our core product allows us to maintain our exacting standards and continuously refine our designs.
At the same time, we recognize the value of strategic partnerships. Our nationwide delivery network helps us serve funeral homes across all 48 contiguous states without maintaining an extensive in-house fleet of vehicles—a perfect example of how a hybrid approach can optimize both service quality and operational efficiency.
Whether you're considering bringing mortuary equipment maintenance in-house or evaluating service providers for outsourcing, the right decision will align with your specific needs, resources, and long-term vision. By thoughtfully weighing the factors we've explored, you can develop a sourcing strategy that serves both your operational requirements and financial goals.
Sourcing isn't a one-time decision but an evolving strategy that should adapt as your business grows and changes. The most successful organizations regularly reassess their sourcing mix, ensuring it continues to support their mission as the business landscape shifts around them.