Outscourcing Flashcards
Outsourcing
Outsourcing involves delegating one or more business processes to an external provider, who then owns, manages, and administers the selected processes to an agreed standard.
Benefits of outsourcing
Access specialist suppliers with greater capabilities and higher quality
Reduce costs if outsourcing supplier is able to provide at lower cost(e.g through economies of scale)
Focuses the business on its core activities- where it can add value
Makes operations more flexible- e.g. easier to change capacity when needed
Drawbacks of outsourcing
Risk that outsourcing supplier will fail to meet quality standards or otherwise not deliver
Potential loss of expertise from the business
No guarantee that costs will be lower
The potential of poor customer service, with communication made difficult because of cultural differences
Existing employees may feel demotivated if they believe their jobs are at risk
Breakdown in communication in the production chain
More difficult to implement JIT
What can outsourcing do
Can lead to increased efficiency and lowered costs. The outside businesses who take on the job will often carry out the same work for a lower cost.
Outsourcing moves jobs outside the business and may even replace them with employment overseas (sometimes called ‘offshoring’).
Offshoring
Offshoring involves the relocation of business activities from the home country to a different international location
