Introduction :
Nowadays, many organisation are outsourcing their non- core activities to an external agents. Distribution is one of these activities as distribution consider as a non-core activity for many firms. Although, there are many advantage for outsourcing, there are also risks and disadvantage in this process. In this essay I would explain the term outsourcing and explain why organisations are preferring to outsource some of its functions in today’s environment. Also, in this essay it has been tried to analysis the advantage and disadvantage of the outsourcing process and its risks towards the organisation.
The word outsourcing could be described as the contractual relationship with a specialised outside service provider for work traditionally done in-house. Outsourcing could also be defined as the use of external agents to perform one or more organisational activities. In the last decade or so there has been a trend, particular among large scale companies, to hand over the whole or part of the distribution function to the external agents.
One should emphasis that outsourcing is an issue that is not specific to distribution. Many other organisational functions, such as information system, building maintenance, etc…, have been outsource for many years in organisations.
There are different reasons for organisations outsourcing their distribution function. More and more organisations today face a dynamic and changing environment. This, in turn, is requiring these organisations to adapt. Competition is also changing. The global economy means that competitors are likely to come from across the ocean as from across town. Successful organisations will be the ones that can change in response to the competition and changing environment. In other words, they will be flexible.
Therefore, today’s organisation stand in sharp contrast to the typical bureaucratic organisations that have many vertical levels of management and where control is sought through ownership. In such organisations, Research and Development are done in-house, production occurs in company-owned plants, and sales and distribution are performed by the company’s own employees. To support all this, management has to employ extra personal including accountants, human resources specialist and supply chain management specialists. However, nowadays successful organisations outsource many of these functions and concentrate on what it do best.
Outsourcing can help organisations to reduce the impact of change in the environment by outsourcing some functions to specialist companies on that function who have more expertise and focus to concentrate on managing change. So, outsourcing could consider as a strategy to manage change in the external environment.
Outsourcing simply means acquiring services from an external organization instead of using internal resources (Butler, 2000). By using outsourced resources, organizations can gain a competitive advantage by utilizing contingent staff to accomplish strategic goals without incurring the fixed overhead. By focusing on the leading edge and highly specialized skill sets, outsourcing providers can often offer higher quality services, or at a lower price than the client organization. Typical reasons for outsourcing go beyond simple contingent staffing. Outsourcing providers are able to maintain economies of scale with regard to specialization (...
Recently outsourcing has been in the news, especially during political election years. It seems to be a phenomenon that is causing much concern among the population. But exactly how is outsourcing effecting both workers and businesses? And is it as big of a problem as politicians describe?
The proponents of contracting out assume that outsourcing in the IT sector is useful in strategic, technological, and economic reasons. (Gonzalez, Gasco & Llopis, 2009) They believe that outsourcing enables an organization to get the same or better services with lower cost. First, strategic advantages enable organizations to refocus on strategic and core functions, and provide flexibility for organizations because organizations need not to concern about routine tasks (Gonzalez, Gasco & Llopis, 2009). OPPGA (1998) also support these strategic advantages. It asserts that outsourcing can provide organizations with great flexibility in personnel and facilities in short-term projects. Outsourcing providers can provide better services for clients since they usually use new and developed technologies. Second, proponents think that outsourcing gives organizations opportunities to access to technology and reduce technological obsolescence without large investments (Gonzalez, Gasco & Llopis, 2009). Lastly, Pros assume that contracting out can save s...
This part of the book shows how the business or organization, and the individual managing it can be involved and can contribute to the external environment. Peter Drucker named this compilation The Essential Drucker because he chose and incorporated the most vital concepts from his works which would add value to the reader when it comes to managing the business or organization, managing one’s self, managing other managers, and managing subordinates.
In many cases outsourcing has proven to be beneficial for businesses. It can help a business’s management by allowing executives to focus on the core structure of the firm rather than every specific element. Production, manufacturing, or additional servic...
Outsourcing, the practice of transferring certain job functions to companies whose employees perform them for less money overseas, is not something that only happens in the corporate world. Following in the footsteps of corporate outsourcing, some state governments, including the state of California, are also beginning to outsource state-funded projects, departments, and services.
Outsourcing relationships demand the same care and attention to sound management principles and practices as do in-house operations and valued employees. Managed well, continuous improvement, increasing value, and constant innovation can be expected. Managed poorly, the services and overall relationship deteriorates resulting in higher costs, operational disruption and lost business opportunities. Financial savings from lower international labor rates were the most important motivation for the early outsourcing decisions. Offshoring, next-shoring, re-shoring and near-shoring are several strategies that will be covered next as part of understanding a globalization strategy for a company.
...pital resources like distribution vehicles and storage warehouses should be outsourced to help reduce the high cost of operation which in turn can lead to reduction of its products price. The company should concentrate on product development and evolution and delegate distribution roles to outsourced firms. Such initiatives have worked well in the new Indian market and should be implemented in other areas.
Outsourcing has been around for many years. In this paper, I will discuss some of the history of outsourcing, the good things about outsourcing, and the bad things about outsourcing. Outsourcing is important because many companies rely on it in order to get many different products and services to their facility on time and in good shape. Outsourcing is a huge part of the business industry today. Any business can be affected by outsourcing.
Rao, K., and Young, R. R. (1994) Global supply chains: Factors influencing outsourcing of logistics functions. International journal of physical distribution and logistics management. Vol. 24. No. 6.
Outsourcing is a technique for companies to reassign specific responsibilities to external entities. There are several motivations for outsourcing including organizational, improvement, cost, and revenue advantages (Ghodeswar & Vaidyanathan, 2008).
...urcing services, the company operation will be became a mess. This is because one organization can’t run a lot of task or project at one time. Therefore an organization need outsourcing in the way to help their organization run smoothly.
The following paper will detail the impact on businesses concerning outsourcing and the global environment. This paper will outline the needs of the modern business to embrace the concept of outsourcing and the need to educate employees on the diversity of global business practices.
A disciplined approach to management eying leading employees, improving the management team and building the business strategy. Instead of treating each problem as a one off. They design systems and structures that make it easier to handle in the future. (Techrepublic, 2015) 2.2. Risk of exposing confidential data: When an organization outsources HR, Payroll and Recruitment services, it involves a risk if exposing confidential company information to a third-party Synchronizing the deliverables: Some of the common problem areas include stretched delivery time frames, sub-standard quality output and inappropriate categorization of responsibilities. At times it is easier to regulate these factors inside an organization rather than with an outsourced partner Hidden costs: Although outsourcing most of the times is cost-effective at times the hidden costs involved in signing a contract while signing a contract across international boundaries may pose a serious threat Lack of customer focus: An outsourced vendor may be catering to the expertise-needs of multiple company at a time. In such situations vendors may lack complete focus on your organization 's tasks. 2.3. 1.Know the
Outsourcing is the final option for logistics management. When this happens, transportation firms concentrate on logistics, and the company can concentrate on it’s production. There are many cost savings using this type of program, however that lack of control can negatively effect many companies.