Outsourcing Strategies in Modern Business - Essay Example

Introduction As a result, outsourcing strategies have been widely accepted in order to reduce expenses, improve productivity, operations management,and delivery, and concentrate on upgrading the company's technological expertise. In this paper, discussion how big business organizations which depend highly on efficient delivery and distribution procedures gain their success in the competitive market environment was carried out by examining the strategic implications of outsourcing and its benefits and costs as a more flexible and decentralized organizational business strategy that replaced the traditional principles of outsourcing. As a popular business strategy in the current global business environment, outsourcing was discussed in a holistic manner to justify the inevitable success it brings to business units. Outsourcing By diversifying, companies expected to protect profits, even though expansion required multiple layers of management. Subsequently, organizations attempting to compete globally in the 1970s and 1980s were handicapped by a lack of agility that resulted from bloated management structures (Corbett, 1996). However, most organisations were not totally self sufficient; they outsourced those functions for which they had no competency internally. Publishers, for example, have often purchased composition, printing, and fulfillment services. The use of external suppliers for these essential but ancillary services might be termed the baseline stage in the evolution of outsourcing. The main business purpose for outsourcing is to enhance the value of an organization's offerings to its customers (Earl, 1996). In the electronics industry, increased market competition identifies continuous adjustment and improvement in the production lines, outsourcing and supply chain management of companies. Interdependence and participation of suppliers and manufacturers in product design, innovation, as well as research and development characterize the current international business environment resulting to market volatility (Sobrero & Roberts, 2001; Appleyard, 2003). These organizations usually share proprietary corporate data with external suppliers and partners while ensuring maximum security to enhance efficiency across the product lifecycle by streamlining procurement, production, fulfilment, and distribution processes (Katsikeas, Schlegelmilch & Skarmeas, 2002) which requires integration of applications and data across multiple geographically dispersed supply chain partners, as well as internal integration with legacy systems (Katsikeas, Schlegelmilch & Skarmeas, 2002; Appleyard, 2003). Benefits Outsourcing manufacturing is one of vital business and supply chain strategies which are one way companies are revolutionising business operations to deliver better products faster at lowest cost possible (Domberger, 1998). It is a kind of supply chain collaboration model and strategic alliance approach, which allows the OEMs to concentrate on product development, sales and marketing (Bounfour, 2003). It eventually helps business organisations to gain competitive advantage of increased product availability, reduced inventory; minimized total logistics cost and rapidly introduce their product to market without a significant investment in plans for capital equipment (Arnold, 2000). Normally, there are two types of outsourced services, technology and business process. Each can be inert partial to the subsequent areas. The first type of outsourcing is the technology services. This type covers the electronic commerce (e-commerce), infrastructure (networks), software (applications), telecommunications and website development and hosting. The second type of outsourcing is the business process outsourcing. Under this type of outsourcing are customer contacts (customer relations management), equipment, finance/accounting, human resources, logistics, procurement/supply chain management and security. Lee et al (2002) stated that there have three major outsourcing drivers: (a) economic - expense reductions, cost control and containment; (b) strategic - sharing risks, gaining access to new resources, achieving quicker time to market, as well as exploiting internet opportunities; and (c) technical - access to new technology; access to special expertise, coping with increasingly sophisticated risks and keeping up with the increasing complexity and speed of technology changes. There are many reasons for outsourcing in a company or an organisation. The most common reasons for outsourcing are the needs for expertise, that is due to lack of learning curve and re-creating; manpower, for having not enough staff; time requirements, because of the limited time available to accomplish the job; needed for economics, owing an overall cost savings; shifting of responsibility as for deniability; and removing of stumbling blocks in keeping the work for flowing. Ansley (2000) reports that by using the outsourcing concept Cisco has found that time to volume was cut by 25%, giving an additional $100 million US contribution to revenue, and on average, an iteration of the prototype phase is eliminated and the remaining four are shortened by more than a week. According to Ryan (1996) in his review of the current literature, outsourcing is a trend that will continue. There are many benefits to outsourcing, including freeing up management resources, sharing costs, creating integrated networks, building new organization structures, training staff, and interfacing with other information systems. Outsourcing offers a company functional specialization and flexibility (Economist, 1994). On the downside, some of the negatives include difficulties in maintaining confidentiality, retaining control, and confronting transition problems. Ethics The discipline of outsourcing is commonly characterized with interaction procedures and immersion processes of the social volunteers into the natural environment of the concerned people into which they gather the data and other relevant information that will eventually help in promoting better living conditions to individuals experiencing unequal life opportunities. Usually, the methods outsourcing fall under the qualitative paradigm and critical approaches, this ensures that the case being handled is clearly understood by the party that the volunteer represents so as also to guarantee that the right aide and assistance needed will be availed by the clients. Such methods include the ethnography or community immersion, interviews, group discussions, observation and participation in the field as well as the contextual analysis and interpretation of the gathered information secured tightly by the concepts of privacy and confidentiality. The intervention methods in the case of outsourcing differ significantly and are apart from common social research methods since the volunteers professionally deal and involve themselves into the cases that they handle in the hope of giving them what they need. The sensitive and private nature of each of the cases being handled and the types of clients, dictates the work to be more carefully implemented and utilized. As an individual working for the benefit and enhanced well-being of a client in the discipline of outsourcing, it is imperative that the outsourcing is armed with righteous attitude when dealing with sensitive issues as called for the daily duties of work. Practicing respect to confidentiality as well as privacy when it comes to dealing with personal discomforts of abused and maltreated individuals especially among women and children cases should be recognized among outsourcing. Being able to decide on what is good and beneficial to the victim or client as well at the same time following the ethical standards of professional practice most often than not confront outsourcing. Given these factors, the knowledge and qualifications of the outsourcing to investigate and inquire into the private lives of people should be given proper evaluation and assessment. In the reality of significant changes that have taken place in the practice of outsourcing throughout its history, outsourcing has continued to embrace a set of values central to the profession. There have been both challenges to and constructive changes in the value base of the profession, but the key elements of this foundation have endured. Although there has been considerable stability in the core values of the profession, it would be a mistake to conclude that the day-to-day ethical issues that outsourcing encounter has remained static. To the contrary applications of core values in outsourcing have undergone substantial change over the years in response to social, political, and economic developments. The subject of ethics and values in outsourcing is broad in scope. It encompasses three distinguishable and related sets of issues. The relevance of the profession's value base to its overall mission, goals, and priorities is the first concern. Second concern would be the ethical decisions and dilemmas that the outsourcing encounters as they carry out their professional duties, and lastly, it relates to practitioner misconduct and the enforcement of ethical standards in the profession (Pumphrey, 1959). References Ansley, M 2002,CMA Management,Hamiton,vol. 74, no. 1,pp.31-35. Appleyard, MM 2003, 'The Influence of Knowledge Accumulation on Buyer-Supplier Codevelopment Projects', Journal of Product Innovation Managementvol. 20, no. 5,pp. 356-373. Author(s): Maurizio Sobrero1 | Edward B. Roberts2 Arnold, U 2000, 'New dimensions of outsourcing: a combination of transaction cost economics and the core competencies concept', European Journal of Purchasing & Supply Management, vol. 6, pp. 23-29. Bounfour, A 2003, The Management of Intangibles: The Organisation's Most Valuable Assets. Routledge: London. Corbett, MF 1996, 'Outsourcing as a Strategic Tool', Canadian Business Review, vol. 23, pp. 14-16. Domberger, S 1998, The Contracting Organization: A Strategic Guide to Outsourcing, Oxford University Press, Oxford. Earl, M 1996, 'The Risks of Outsourcing IT', Sloan Management Review, vol. 37, pp. 26-32. Economist 1994, March 5, 'Farming Out the Farm', p. 79. Katsikeas, CS, Schlegelmilch, BB & Skarmeas, D 2002, 'Drivers of Commitment and Its Impact on Performance in Cross-Cultural Buyer-Seller Relationships: The Importer's Perspective', Journal of International Business Studies, vol. 33, no. 4, pp.757+. Lee, JR & Chen, JS 2000, 'Dynamic synergy creation with multiple business activities: Toward a competence-based business model for contract manufacturers', in Sanchez, R & Heene, A (editors), Theory Development for Competence-based Management, Advances in Applied Business Strategy, vol. 6A, pp. 209-228, Stamford, CT: JAI Press Inc. Pumphrey, M. W. 1959 "The Teaching of Values and Ethics in Outsourcing Education". Council on Social Work Education. New York. p. 23 Ryan, C 1996, 'Outsourcing', Journal of Small Business Management, p. 34. Sobrero, M & Roberts, EB 2001, 'The trade-off between efficiency and learning in interorganizational relationships for product development', Management Science, vol. 47, no. 4, pp. 493-511. Read More