Question 1 – Role of outsourcing
Outsourcing is used in order to allow organizations to concentrate on their core
competencies. Companies outsource some processes in order to improve its business
process, to have control on operating costs, to respond to shorter product cycles and
better face external competitors.
Decision-making is crucial for the outsourcing process and is supported by the analysis
of technological trends, assessment of strategic alignment, core competencies and cost
analysis.
For instead, logistics, IT, electronics are some processes that can be outsourced by a
company.
Role of procurement
Procurement is the process in order to obtain and identify goods and services. It
includes sourcing, purchasing, identification of potential suppliers. Its main goals are
to ensure a continual flow of raw materials at the lowest cost, to ensure the quality of
the finished goods produced and to improve customers’ satisfaction.
Question 2 – Risks with outsourcing many of a firm’s activities
Unanticipated Costs
At first glance, the improved efficiency and financial savings may look appealing. But
the increase of shipping costs for hauling freight and associated taxes can put a damper
on cost projections that initially appeared promising.
Potential for Setbacks
It is not always about time saving: one scenario could be inventory not being received
on time, which means consumer demand wouldn’t be met. In turn, this could lead to
revenue loss and further glitches within the supply chain.
Integration Difficulties
The transition process can be a problem, financial backing is required as well as a
considerable time investment from both parties. Even a minor lack of communication
can result in mishaps and delays.
Quality Suffers
When the organization chosen for outsourcing lacks experience, the quality of your
products may diminish leading to sales decrease along with the brand equity.
Benefits with outsourcing many of a firm’s activities
- Focus on Other Business Aspects
- Minimize Overall Costs (= financial savings)
- Meet Customer Demand
- More Flexibility
Question 3 – Key issues for deciding what to make internally
- Time consuming
- Multitask, no specialization
- Price issues: might not
Key issues for deciding what to buy from outside suppliers
- Quality
- Delivery time