Strategies of Outsourcing and Offshoring †MyAssignmenthelp.com

Question: Discuss about the Strategies of Outsourcing and Offshoring. Answer: Introduction: In todays business world, in order to sustain, business owners adopt ways and methods that can make their work flow fast and efficient(Kremic, 2006). Outsourcing is the only way that can prove beneficial as it assists in delegating work to outside people. The term outsourcing can also be defined as a process of delegating work to other people who are not joined with the firm but are supposed to carry certain tasks under agreed criteria(Bucki, 2017). Generally companies outsource tasks that require special treatment or the ones which could prove expensive for them. There are many ways by which outsourcing function can be carried like performing tasks in house, manufacturing in other units; IT enabled service, providing online jobs, or getting expert advices(Iqbal, 2013). Though there are many who do not believe in outsourcing as it has got many drawbacks also, but still on some or the other way has to delegate work to others like transportation, currier, engaging lawyers, etc. For a s ingle or limited group of people, to perform all the tasks are not possible and can lack quality(Mukherjee, 2014). In this research paper advantages and disadvantages of outsourcing business function will be reviewed and concluded after observing potential reasons for outsourcing in small and big organisations. Study made by many authors and researchers have been utilised in this paper to make detailed analysis of the topic to provide assistance to those who are planning to implement outsourcing function in their business. The primary feature of outsourcing i.e. performing work in shorter time along with cost reductive manner has made outsourcing function an integral part in many organisations. Companies outsources work to others in order to get involved with latest technologies and trends which could otherwise would have been difficult to perform under limited area and people(Pine, 2017). Thus external companies and agents with latest technologies are outsourced by major companies to get updated outcomes of latest trends. Time and cost saving are also significant objectives that makes organisations outsource their work along with getting efficiency(Iqbal, 2013). In the above figure it is clearly shown that objective behind outsourcing can be fulfilled in different manner but at the same time can become risk oriented without proper strategy. The reasons behind outsourcing are so apparent that sometimes many companies falls into its prey and has to bear unexpected losses(Mukherjee, 2014). To identify the pitfalls behind outsourcing it should be the primary target of businesses to recognize the risks before handed or else could lead them with adverse affects. In business where the work area is small and has limited capital, outsourcing becomes a great help as it enables sharing risks with outsourced agencies and thus releases risk of capital. Depending on the temperament of business, objectives behind outsourcing can vary but the ultimate goal lies in improving product/services(Syluancia, 2009). The scope or purpose of outsourcing is been identified to a great extent by business owners these days and have been accepted by them to fulfil many purposes(Riley, 2010). The basic scope provided by outsourcing, as shown in above figure can be further explained after evaluating it by placing different examples(Robe, 2017). Transitional or intermediary outsourcing is related to those tasks where company outsources particular task to outsiders for a certain period of time or till the task is completed. For example, delivery of goods, transporting raw materials to vendors, cleaning and sanitising, hiring mechanics for electrical fittings, labours, etc(Ahmed O. Al-Mutairi, 2015). These types of outsourcing provide a limited scope for risk as external agencies are engaged for shorter span of time. Selective outscoring is generally adopted by manufacturing companies as it deals in delegation of limited and particular work to outside companies on regular basis. Organisations where manufact uring small parts are not done in house as outsourcings confirm better way, selects other external companies to undertake that part in return of agreed costs. This function can be performed by outsourcing it to one or many companies at a time and involve risks higher than transitional outsourcing(Syluancia, 2009). Other examples are advertising function, computer related service, creative designer hiring, freelancers, etc(Pine, 2017). Lastly, there are organisations who believe in total outsourcing their business functions and assembling the entire work under their supervision. This kind of outsourcing is generally done in computer manufacturing companies where different parts of computers are assembled and is sold under name of outsourcing company. Many clothes manufacturing companies also outsources its works to different designers and tailors which are later on sold under companys name(Robe, 2017). In literature, outsourcing has gained much consequence and has become an important subject to study for researchers and writers(Kremic, 2006). The advantages of outsourcing can be identified largely which has made it an inevitable part of business. The below diagram gives an outline to the study which is further defined in a detailed and specific way with the help of studies made by different authors. Improve Company Focus has been an advantage which has made large companies adopts outsourcing. While work is delegated to outsiders, the management or executing part of the company gets released with energy which can be utilized in focussing other important areas while quality of the work is also not depreciated(Pine, 2017). Menial jobs can be outsourced as it comprises of minimum to no risk and leave the experts of the company to perform other growth oriented work. For example, in hotel business, if the regular purchasing or completed food delivery task is outsourced, it may release managers to perform other official works. In supply and logistics firm, transporting vehicles are outsourced which saves companys time and energy required for its regular maintenance of vehicle parts and hiring drivers(Robe, 2017). Reduced operating costs are another advantage recognised while outsourcing. This can also be said as main reason why small companies outsource its major work outside. While ou tsourcing, the need of hiring full time staff is eliminated and also to make arrangement to perform the task in house is not required(Ahmed O. Al-Mutairi, 2015). In manufacturing firms setting of machines is required and sometimes becomes difficult for the company to purchase and requirement of special trained staff for a particular task is also necessary. Outsourcing can be immensely used her for reducing cost of performing those tasks(Yeboah, 2013). Improvement in work quality is ensured in outsourcing as contracts are made by outsourcing firms and the outsourced agencies are obligated to perform the work under their conditions. While the experts are engaged, the efficiency and work quality is improved in cost effective way. For example, large organisations outsource its advertising part to social media and other advertising agencies that specialises in their field and with their experts and current knowledge about advertising, can provide better service to the organisations. While engaging experts to the company, business competence is gained. In organisation where large number of paper works is required to be dealt with along with handling legal cases, outsourcing can be done to experts who can handle the work more efficiently(Pellicelli, 2012). Like changes in government regulations and legal requirements is fast observed by experts of those fields and changes made according can be easily done without hampering business code. Strategic management is required in todays business scenario which can only be obtained by involving expert advices(Yeboah, 2013). Since their charges for full time service is higher, outsourcing becomes the way to get access to their expertise in reduced costs. For example, in construction firms where large number of contracts is made with suppliers and buyers, legal advices are required so that the companies are aware of government regulations regarding taxes and property leases. They outsource legal advisory works to agencies specialist in legal advising and corporate lawyers for getting acceptable advice(Gardener, 2015). Establishing world class technology is also ensured as outsourcing is generally made by the companies to them who are tailored with latest tools and procedures. Even if the company is older or has been established long way back, outsourcing its work to other companies with latest technologies can provide a scope for changeover to new trend. Smartphone companies utilising outsourcing techniques is visible in latest news where mobile producing companies outsources software development units to other advanced companies (Meyer, 2011). In airline industries also outsourcing have made a significant role where latest aircrafts and planes are manufactured by other companies with special and latest technologies(World Airline News, 2017). Lastly, to beat competition and gain sustainability, outsourcing plays an important role. This advantage is observed after realising all the above mentioned features and advantages of outsourcing by organisations as after realising it, the company must have b ecome enriched with all necessary features like cost efficiency, work effectiveness, expert engagement and time saving(Syluancia, 2009). To gain competitive advantage, the organisations follow strategic managerial procedures which can be in the form of self performance or outsourcing to other special agencies(Pellicelli, 2012). Thus the company is able to take on newer risks and challenges after outsourcing which might be helpful to overcome others in the same market area while reducing self energy for other expansion related work(Bucki, 2017). Outsourcing has many disadvantages also which has been discovered by researchers and had been estimated for business owners to make them aware of its cons while implementing it in their business(Simeoni, 2011). The following figure outlines major disadvantages of outsourcing and further explanation about it have been supported by various examples. Communication barriers are the most significant disadvantage noticed in outsourcing function as whenever outsourcing is done, it involves larger community of people belonging to different culture(Simeoni, 2011). There are times when the companies are unable to meet with the outsourcing agents personally and hence are unsure about their work quality. Where the outsourcing is done to other countries, this problem proves to be immense as language along with culture is highly diversified. This difference can lead to higher tendency of miscommunication and result in affecting the work performance(Telus International, 2017). For example, in construction industry the designing function is normally outsourced to other country experts to bring diversified and newer designs in their construction portfolio. If the designers are unaware of the climate or culture of the outsourcing countries and does not understand the actual requirement, the design sent by them can be of no use or when applied c an prove unsuccessful(Mahesh, 2009). The tendency of work quality reduction is higher in outsourcing as the external agents are more inclined to make profits rather than spending utmost time in product development or maintaining good quality throughout. As the quality reduces, sales also get down and hence prove to be fallback for the company. Management requires giving consideration to proper budgeting while utilizing outsourcing function as sometimes if miscalculated; outsourcing can prove to be cost escalating(Kremic, 2006). For example, in hospitals, cleaning function is normally outsourced to outer agencies. If the work area is limited and requires lesser time in cleaning and sanitising, the outsourcing can prove beneficial. On the other hand if the area is bigger and requires cleaning at regular intervals of the day with strict monitoring, outsourcing can prove expensive and hiring permanent staffing can then establish cost reductive way(Pine, 2017). The outsourcing agencies normally deal with many companies simultaneously to fulfil their primary target of profit earning. While they engage in many works at a time, propensity of delay at work is probable. Although agreements to maintain time punctuality is made in the agreements, still companies has to face trouble while not getting works done on time. This problem is normally faced while outsourcing transportation function and many companies face problems helplessly as the agents can easily make excuses of climatic and governmental issues(Kishore, 2010). Other issue faced by outsourcing companies are that they get delayed support by the outsourced companies at the time when any problem is identified in products or services. The external agencies who performs work for many companies might not get enough time to concentrate on each outsourcing company and while queries are delayed, the overall costs of the project is hampered along with companies getting annoyed. Lack of security o f data is another important disadvantage recognised while outsourcing. While internal management work is outsourced, data related to internal management and company secrets are sometimes required to be discussed with outsiders. Thus chances of getting them leaked become higher and loss of significant data might prove dangerous for the company(Telus International, 2017). For example, while outsourcing accounts maintaining function of business, the outsourced accounting agents or accountant may ask for credentials that are significant and at the same time necessary to present. If the outsourcing agent is fraud, they may make negative use of it and can even share or sell information with company competitors(Simeoni, 2011). Many companies also face problems while outsourcing as they tend to lose their control over the outsourced function. The external agencies or experts might not allow the company to invade into their work area and thus the owners remain unfamiliar with the work proces ses. Although they are entailed to spend expenses for work but to get control over it becomes difficult. The agencies sometimes take advantage of the situation and perform the work in inferior and degraded way(Mukherjee, 2014). Conclusion: It is important to understand pros and cons of outsourcing as it is continuously developing in business and has become an integral part of commerce(Kremic, 2006). Although researchers have provided with many reasons to implement outsourcing into business, at some areas gaps can be identified in the study which limits to cost and talent related function of outsourcing. To make the research more appropriate, those gaps should be identified by giving an insight to processes and methods of successful outsourcing. Objectives behind outsourcing are several but the major ones defined are introduction of talent and skill in the company along with reduction of cost(Riley, 2010). To save time and energy is also observed while outsourcing but at the same time can prove disadvantageous if not monitored with concern. Business owners who do not look into contracts before signing it with outsourced companies are normally the ones who suffers severely while other who take precautions gains utmost ad vantage of outsourcing(Pellicelli, 2012). The identification of advantages and disadvantages have been keenly observed in this report which can be summarised as advantages being potential enough to attract the business owners while disadvantages are the result which is faced by them due to negligence in strategic management(Kremic, 2006). References: A, V., 2017. 13 ultimate Pros and Cons of Outsourcing Offshoring. [Online] Available at: https://www.apoyocorp.com/13-ultimate-pros-and-cons-of-outsourcing-and-offshoring [Accessed 28 August 2017]. Ahmed O. Al-Mutairi, A.A.-H.a.K.F., 2015. Advantages and Disadvantages of Maintenance Outsourcing inManufacturing Companies: With Special References to JubailIndustrial City KSA. 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