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Outsourcing - Essay Example

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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 ...Show more

Summary

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…
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