Businesses can also avoid expenses associated with overheadequipment and technology. In addition to cost savings, companies can employ an outsourcing strategy to better focus on core aspects of the business.
Surviving Supply Chain Integration: Strategies for Small Manufacturers. Washington, DC: The National Academies Press. doi: / Part I introduces the concepts of outsourcing and supply chain integration. Part II identifies the requirements imposed on SMEs by integrated supply chains. IS IT CORE OR STRATEGIC? OUTSOURCING AS A STRATEGIC MANAGEMENT TOOL. by: Denis we examine a methodology for linking outsourcing to business strategy; and in Part III, we look at a case study in progress of a large strategic outsourcing relationship. The concept captures the grey zone between core and . Outsourcing is "an agreement in which one company hires another company to be responsible for an existing internal activity." It often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center support). The term "outsourcing" came from "outside resourcing" and dates back to at least .
PrattFrancesca Sales Share this item with your network: Companies today can outsource a number of tasks or services. They often outsource information technology services, including programming and application development as well as technical support.
They frequently outsource customer service and call service functions. They can outsource other types of work as well, including manufacturing processes, human resources tasks and financial functions such as bookkeeping and payroll.
Companies can outsource entire divisions, such as its entire IT departmentor just parts of a particular department.
Outsourcing business functions is sometimes called contracting out or business process outsourcing. Outsourcing can involve using a large third-party provider, such as a company like IBM to manage IT services or FedEx Supply Chain for third-party logistics services, but it can also involve hiring individual independent contractors and temporary office workers.
Reasons for outsourcing Companies often outsource as a way to lower costs, improve efficiencies and gain speed. The underlying principle is that because the third-party provider focuses on that particular task, it is able to do it better, faster and cheaper than the hiring company could.
Given such benefits, companies often decide to outsource supporting functions within their businesses so they can focus their resources more specifically on their core competencies, thereby helping them gain competitive advantages in the market. However, some companies decide to outsource for other reasons.
Companies sometimes opt to outsource as a way to shift meeting regulatory requirements or obligations to the third-party provider.
Furthermore, more companies are looking to outsourcing providers as innovation centers. Nearshoring is a term used for work done or services performed by people in nearby, often bordering regions and countries.
Outsourcing pros and cons In addition to delivering lower costs and increased efficiencies, companies that outsource could see other benefits. By outsourcing, companies could free up resources i.
Outsourcing, however, can produce challenges and drawbacks for companies. Learn more about the pros and cons of outsourcing. Companies engaged in outsourcing must adequately manage their contracts and their ongoing relationships with third-party providers to ensure success.
Some might find that the resources devoted to managing those relationships rivals the resources devoted to the tasks that were outsourced, thereby possibly negating many, if not all, of the benefits sought by outsourcing.
Companies also could realize that they lose control over aspects of the outsourced tasks or services. Ethics Outsourcing has raised some ethical issues for companies as well.
Most notably, some have criticized the practice for its impact on workers. Employees at companies that decide to outsource frequently see the decision to outsource as a threat to their job security; in many cases, that fear is justified as they lose their jobs to workers who may be paid less and receive fewer benefits.
This scenario has also drawn criticism from the public as well as from politicians, labor leaders and others. As the name implies, insourcing refers to the practice of having in-house teams perform functions that could be handled by outside companies or contactors.
Thus, insourcing can be viewed as the opposite of outsourcing. Sometimes insourcing involves hiring new employees, either on a permanent or temporary basis, to execute the tasks being insourced. Companies might need to invest in new equipment, hardware and software when insourcing, and they might need to re-engineer business processes as well.
Outsourcing trends and future directions Although outsourcing had been viewed as a way to lower costs and gain efficiencies, it is increasingly becoming a strategic tool for companies, too. This was last updated in January Continue Reading About outsourcing.Outsourcing was first recognized as a business strategy in and became an integral part of business economics throughout the s.
The practice of outsourcing is subject to considerable controversy in many countries. Those opposed argue it has caused the loss of domestic jobs, particularly in the manufacturing sector.
Surviving the digital revolution and transformation is not just about shiny new technologies, which of course are important and a means to an end, but it is about strategic intent, operational execution, culture and mindset, and rethinking the product development and service delivery model.
Outsourcing can involve using a large third-party provider, such as a company like IBM to manage IT services or FedEx Supply Chain for third-party logistics services, but it can also involve hiring individual independent contractors and temporary office workers.
In addition to cost savings, companies may also employ outsourcing strategies in order to focus on core business competencies.
This allows companies to devote more resources to what they do well, which can improve efficiency and increase competitiveness. Production can be streamlined and production times shortened while reducing operational costs.
successes of firms that have introduced the philosophy of outsourcing into their business strategies allow us to hypothesise that its expansion in the industry will proceed apace.
References 1. Caldwell B., The new outsourcing partnership, Information Week, 24 June, pp.
2. outsourcing concept: the surviving strategy for modern business enterprise by bright w. amadi OUTSOURCING CONCEPT: THE SURVIVING STRATEGY FOR MODERN BUSINESS ENTERPRISE BY BRIGHT W. AMADI Introduction The concept of outsourcing is traced back to the concept of Supply Chain Management that is centred on cost minimization and optimization of.