IntroductionPurposeThe main purpose of this report was to analyze how manufacturing sector is entering into outsourcing. The report looked on different factors that have to be considered before deciding to outsource and advantages and challenge of outsourcing. AuthorizationThis report was authorized the CEO. It was motivated the growing trend towards outsourcing and it was mainly meant to look at the advantages that the manufacturing sector could gain from outsourcing. LimitationsOne of the limitations of this report was time. It required a lot of time to find and analyze the necessary material on outsourcing which was not an easy task.
Scope of reportThis reports looks into outsourcing. The report analyzes the concept behind outsourcing. It also looks into the ways in which the manufacturing sector has benefited from outsourcing and why most companies prefer to outsource production services. The report also looks into advantages and challenges of outscoring. Outsourcing Contracting out of business process to foreign providers is not new. It has emerged as the concept of offshoring that has taken the world by storm. Offshoring, which also encompass the process of outsourcing, has been practiced for decades now.
Outsourcing has been practiced since the 1960s but the concept has gained prominence use in the recent past, beginning in the 1980s. It is evident that the process of outsourcing has developed along the line of growth in information and communication technologies. The change in structure of outsourcing has been underway, general influenced by the interplay of three factors including technological advances, economic and competitive pressures aimed at reducing cost and improving productivity, and institutional developments of favorable trade liberalization. What is driving outsourcing? The advance in technology has made outsourcing possible due to changes in communication and transportation.
Advanced technology has reduced the cost of transportation which means businesses can now transport goods from one continent to the other cheaply (Summers and Smith, 2006). Advanced technology has also made it possible to disseminate and receive information with ease which has transformed the work process, organization structures and communication between organizations in different continent. Unlike in the past there internal process of making decision on whether to outsource or not, today, this decision can be made in a matter of hours since it will be possible to look for suitable firm to get the contract and comparative prices offered by the firms just be clicking the mouse (Simchi-Levi, Kaminsky and Simchi-Levi, 2008).
Through use of modern information and communication technology, it will also be possible for firms to get an update of the work process which means they can track the whole process as if it was taking place in their own factories. Without growth in information and communication technology, it would have been quite difficult for outsource to take root.
Essentially, the growth in outsourcing has occurred to push and pull factors. Theoretical development of outsourcing is based on the competitiveness of the firm in the domestic market. In order to compete effectively in the global environment, most firms have discovered that they need to come up with strategies to reduce their cost of operation. The main factors driving most firms to outsourcing include the related cost of production, distribution and productivity (Manning, 2007). Outsourcing is therefore seen as a strategy that can be used by the firm in order to gain competitive edge in the market.
For example if the firm can outsource its infection production process to a foreign provider which is more cheaper and efficient, the firm will have time to concentrate on those areas that it can perform best. This mean that it will have opportunity to use its comparative advantage in order to expand its output or engage ni new business activities altogether.