Supply Chain Management and Outsourcing - Essay Example

Wang, C & Regan, AC (2003) posit to the effect that there are many benefits that can be derived from outsourcing logistics operations in large companies such as cost savings, increased quality as well as enabling the organization to concentrate on its core business. There is a high chance that an organization would save costs from implementing this strategy since it will be in a position to employ a reasonable number of workers to perform the work related to logistics operations. The suppliers can charge relatively low prices for performing the tasks related to logistics operations. The suppliers also have special equipment and transport that can be used to perform various tasks related to supply and logistics in the operations of the company.

The other benefit is that the company will be in a better position to concentrate on its core business through outsourcing activities such as supply and logistics to other third parties. This improves its efficiency as well since it will focus on its main business. The company also stands a better chance to enjoy an increased quality of products and services it offers by hiring people with knowledge and experience in performing the task. Specialized and experienced people are likely to be hired to perform that tasks related to supply and this is beneficial to the company.

However, there are certain risks that are likely to be encountered if a company outsources its logistics operations to a third party. There is likely to be a loss of knowledge experienced in the company since all tasks related to logistics and supply will be done by an outsider leaving little room for the employees to gain knowledge about logistic operations in their own company. This may also lead to low employee morale since they will be expected to be followers in the company. The other risk likely to be encountered is related to the aspect of quality. Quality can be compromised if the suppliers do not have quality equipment to execute the tasks they would be expected to perform. When quality is compromised as a result of the activities of the suppliers, then the company will suffer the consequences since it will be responsible for providing the products and services whose quality has been compromised by the suppliers.

Basically, many businesses are increasingly using the strategy of outsourcing their logistics operations to other third parties. There are many benefits that can be obtained from implementing this strategy. However, there are also risks that are likely to be encountered by the company if it solely relies on outsourcing its logistics and supply operations to third parties. Read More