Outsourcing Vs Outsourcing Case Study

Every firm has to make important decisions regarding the production process of a product. Different firms have distinctive production strategies and the main goal is to maximize efficiency as well as financial growth. One important decision that every firm needs to make is to either outsource or insource the production of a product, or parts of a product. Outsourcing and insourcing are techniques of dispersing work among alternative departments or companies for strategic reasons.

When production is within a company’s own operational infrastructure, it is known as insourcing while outsourcing uses companies not affiliated with it to carry out the production.

The management decisions of a company are affected by the two methods due to resource and cost variances.

Small firms and large firms have different perspectives of ‘The Make or Buy Decision’. The two

Firms should weigh the advantages and disadvantages of these methods and apply the technique suitable for the respective firm.

Outsourcing from other firms may have certain drawbacks but it can be a key benefit for small firms. Whereas in-house production can be a boon for large firms as it does not depend on any supplier but it can be a bane for small firms due to lack of resources. On the other hand standard inputs are usually outsourced due to economies of scale and tailor made inputs are made in-house due to asset specificity.

According to my views, both decisions depend on the type of market and firm size. It is advisable for small firms to outsource production, as it is cheaper and would benefit them in many ways and a large firm should make all the components in- house as they acquire the necessary resources required for the production of any input for an output. Henceforth, the choice should be made after weighing in the company’s goals, resources and overall targeted