Outsourcing locally and globally for a variety of reasons Outsourcing is an established business mark carried out by most companies which want to get long term and consistent benefits and especially, for those startups that really wish for jamming their investments. Hence, outsourcing is never any easy step for any type of set up. Mostly, companies look for manufacturing, logistic, information technology and procurement to outsource. But still, there is some confusion about outsourcing strategy and that must be answered. Activities to be outsourced or not to be outsourced: Every business involves some tasks that organization could not handle properly or can get better of it; so, they prefer to outsource.
Many customer service activities can be outsourced. Pure transactional customer interfaces can be easily outsourced unless; if there is no strategic relationship is involved such as retailing activity (Byrne 20). Supply chain process is the main reason of competitive advantage that provides actual compensation of the competitive activity. If an organization has the guts to make a competitive edge and have better resources to deal with an activity; never outsource then (Elliot 8).
Furthermore, lead generation tasks are not deal with proper execution but can bring effective results if outsourced to related firms. Computer programming services, accounting activities and many other HR activities require higher cost in terms of specialist training, remuneration and much other stuff; so, to cut a healthy cost, an organization can outsource them. The famous Germany headquartered based assembly and manufacturing company, GEARBOX got difficulty in handling the giant logistic and ERP system while operating in-house. In1995, GEARBOX started leveraging its ERP system with a part of manufacturing in China, gradually, got producing components too in many other Asian market.
Over, the year, GEARBOX approached with 100% annual profit and sale of 1.6 billion (Kedia 250-261). Determining factors local vs. global outsourcing: Cost is the main factor that determines whether to outsource locally or globally. Obviously, companies will prefer to choose the best option with low cost (Kathawala 40). Low cost is the most probably reason which appeals the overseas and the others. But to manage the people, who are living thousands of miles away are difficult to handle them during work.
Furthermore, language and the social differences may bring major while outsourcing. Face to face work has always been big advantage of working with the local existing people. Even, most of the work is managed with conference calls and via emails. Meetings can also be fixed during complicated projects. There is another advantage, that when employees finish a project; good contractors often rush to get good employees. NIBCO outsourced its IT tasks locally including its seven ERP packages in Indiana and hired some consultants too.
Gary Wilson, Co-lead technology project director presented a point of view that we established our own ownership and transfer only technology knowledge and skills and at the end of day, we had 300,000 employees with the highest revenue of $461 billion (Daryl 107-126). Internal Capabilities required outsourcing: Victorious outsourcing demands certain brawny acknowledgement of the particular organization’s abilities. The decision is really significant regarding outsourcing because here, the organization have to make expertise comparison with others. If the internal capabilities are well-developed regarding maximum opportunities with minimum cost level; outsourcing makes no point. If a new technology or product design is required that an organization’s lack; outsourcing makes its way smoothly (King 58).
So, modern technology with new development designs and strategies are making an organization internally strong. NIBCO had low IT environment in purchasing ERP system that was used to integrate all modules. Consequently, to avoid big loss in this Tiger project, top management decided to outsource its related IT operation locally; which brought a big positive profit change in the organization (Daryl 107-126). Outsourcing Process: Outsourcing process is flourishing with a dynamic rate all around the globe but selecting a perfect vendor keep all risks in mind is never easy.
Selecting a quality committed vendor who could analyze the cost aspect properly would be a positive edge for the organization. However, to justify the reason of outsourcing, it’s important that the particular vendor must have extra resources that you don’t have. The main step involves getting aware of the vendor’s security policies with stable, finance, methodology and design of work. The key personnel help in decision making will be beneficial as consulting with management and HR may bring higher productivity with limited cost.
GEARBOX decided to make dynamic and ambitious plans to complete its outsourcing process only in three years. Its obvious supply to all Asian markets like Korea, Hong Kong, Thailand, Japan and China required enough time to understand the need and capacity of markets (Kedia 250-261). Make sure! Vendor must be aware of client’s needs entirely. In a case of customized services, critical information may be asked. High compatible environment may bring positive effects while outsourcing (Scully 10). Conclusion: The study shows the main outsourcing factor while keeping involved risks in mind.
However, the cases of NIBCO and GEARBOX show that outsourcing can produce maximum profit with high productivity. Even though, global outsourcing can be profitable besides locally, but depends on the trends and bends an organization wants to adapt. Bibliography Byrne, John A. "Has Outsourcing Gone Too Far. " Business Week 1 April 1996: 20. Daryl, Corner R. Managing at the Speed of Change. NY: Villard Books, 1992. Elliot, Vince. "Outsourcing without Risk. " Journal of Property Managemen (1995): 8. Kathawala, Yunus. "Outsourcing to Gain a Competitive Advantage. " Industrial Management.
Vol. 3. NY, 1998. 40. Kedia, L. B. "“Understanding offshoring: A research framework based on. " Journal of World Business (2009): 250-261. King, william R. "Strategic Outsourcing Decisions. " King, william R. Information Systems Management. Vol. 4. NY, 1994. 58. Scully, Ethel. "Many Factors to Weigh in Decision to Outsource. " National Underwriter Life and Health 16 January 1995, Financial Services Edition ed. : 10.