Outsourcing Flashcards
Outsourcing
The process of identifying, selecting and developing suppliers, either relating to tactical or operational low-level procurement decisions that may relate to low-risk, non-critical items or services
Types of outsourcing
Body shop outsourcing
Project management outsourcing
Total outsourcing
Body shop outsourcing
Where management makes use of outsourcing as a means of meeting short-term requirements
Project management outsourcing
When all parts of a project cannot be done in-house
Total outsourcing
Where a supplier is given full responsibility for an area such as catering or security
The decision to outsource is based on various factors:
Quality Costs Finance Core business Cooperation
Activities mostly outsourced
- Resource intensive
- Available from a niche market of suppliers
- Relatively discrete (separate entity) with few interfaces (connecting boundaries)
- Subject to long-term fluctuating work patterns
- Require a relatively small client-side management
- clear contractual accountability can be established
Most commonly outsourced activities
Transportation services, warehouse management and shipment
consolidation
Organisational activities NOT to outsource
Management of strategic planning Management of finances Management of management consulting Control of suppliers Quality control of supplies Quality and environmental management Supervision of and meeting regulatory requirements
Advantages of outsourcing
- Access to the latest innovative information and communication technology
- Reduction of costs by more than a 10 per cent margin
- Optimised use of personnel through the efficiency and use of systems
- Senior management able to focus solely on core business activities
- Enhanced customer satisfaction
- Suppliers forced to maintain a level of commitment
- Quality to the brand of goods or services placed in the market
Disadvantages of outsourcing
- Exact or exclusive knowledge of the business is needed.
- Services are tailored to the specific requirements of a customer.
- Employee morale and the culture within the organisation is not accepting of the approach.
- There are problems with the sourced supplier.
Outsourcing transportation management services
1PL :
Refers to the cargo owners (e.g. shippers) delivering manufactured goods to the consumers alternatively the consignee ( e.g. Retailers) accepting silvery from the supplier
2PL:
Involves the carriers that are providing a transport service that is limited to a specific portion of the transport chain
3PL:
Is a service provider that specializes in transport and other logistical activities
4PL:
4PL manage the functions of the 3PL network
Acts as a middleman between the organization and their 3PL service contractors
Total inhouse sourcing
Aligned with 1PL- when all transportation management services along the supply chain are conducted within the organization
Organization has complete control over all operations and processes
Third-party outsourcing
Organization has 2 options:
- Some logistic activities are done inhouse while others are outsourced
- Organization makes complete use of logistic providers where activities are managed by the supplier
Fourth-party logistics
Intermediary between 3PL service providers and the organization
