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Artemis Sports Wear - Case Study Example

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Artemis sports wear (ASW) is the company, which is facing the problem of stagnation in its net revenues and shareholders value despite increase in its sales volume. This happens due to the fact that operational cost of the company is increasing. Now ASW wants to outsource it's IT, Billing, Customer services and HR processes, which will take place over a 5-year period…
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Download file to see previous pages Basically outsourcing means that products and operations are conducted to outside vendors that have expertise in a particular area. The aim may be to reduce costs by saving on personnel benefits, reduce personnel, or to be able to reassign employees to other tasks that are more important. It enables firms to focus on its core competencies and let outside firms do what these firms can do best. Outsourcing has become cost cutting approach to several firms yet it sometimes does not meet its expectations. Consultants often promise 20-40% savings but the average savings are about 9% (Byrne, 1996). Companies like Apple computer Inc. has outsourced its system and network engineering, telecommunications and help-desk services to Canadian firm. GM, Chrysler, Proctor & Gamble and lots of companies are outsourcing their operational processes to Latin America, china, India and other emerging nations. ASW is thinking of long-term growth and augment value to shareholders. So it has to develop long-term relationship to its service providers who are now present globally. By outsourcing IT services of Global service provider results in cutting cost considerably. To outsource the billing system and communication system ASW has to include it within IT services because both the operations are predominantly information orientation and easier to be included in the initial phase. This step considerably cut cost of operations for ASW. Basically billing is a tedious job and needs more and more information exchange between company and customers and one has to track the information, which ultimately need more and more people. After outsourcing the whole process ASW could concentrate on other operations and surplus employees could be retrained and redeployed to other productive activities. ASW also needs to outsource its production process to global service providers from the emerging economies where the skilled labour force is predominantly cheaper. Cheaper labour force cut the cost considerably. ASW has proposed to outsource its other activities like customer services and HR activities in near future. Though outsourcing of HR activities affect employees considerably and cut the workforce by 54% and it has the potential for employee resentment and affect productivity as well as motivation adversely. That's why ASW proposed to outsource it in the last. Apart from outsourcing the different operations, ASW has to study different various methods to improve productivity like Value engineering, Total Quality Management (Puffer and McCarthy, 1996), and lean manufacturing (Womack, Jones and Roos, 1990). There is a downside to outsourcing. A company may be locked into a contract and may become too dependent on contractors. Where the unions are strong in sourcing could take place as in several organizations like VW (Volkswagen) and General Motors. So before moving to outsource the operational processes, ASW has to analyze the whole situation and should take a holistic view. It should not follow the trend blindly. ASW has the main aim to cut the cost and provide best to their customers and value to shareholders not at the employee expense. So it must analyze the whole situation and outsource its operational processes carefully, systematically and wisely.
References:
1. Byrne, A. John (1996) "Has outsourcing gone to fat" Business ...Download file to see next pagesRead More
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