Assignment:
The decision to outsource is a major strategic one for most companies, since it involves weighing the potential cost savings against the consequences of a loss in control over the product or service. Outsourcing is not necessarily moving jobs/services to another country. It is purchasing products or services from an outside supplier, rather than performing the same work within its own facilities, in order to cut costs.
A relatively new trend in outsourcing is employee leasing, in which specialized vendors recruit, hire, train, and pay their clients' employees, as well as arrange health care coverage and other benefits.
In many companies Human Resource Management is now outsourced. This includes pay, benefits, talent management and time tracking. A company that some may be aware of that many companies utilize to manage pay and benefits is ADP. Business Process Outsourcing (BPO) was pioneered by ADP. Utilizing outsourcing has advantages in this area of business that allows a company to focus more on business aspects and leave the "people pieces" to a proven expert in the field.
According to Schaffhauser (2005), outsourcing is contracting with another company or person to do a particular function. Most organization outsourced in some way and usually for non-core functions because of cost savings for the business. According to the New York Times article (2008), small business routinely outsources their payroll processing, accounting, distribution and many essential functions and often because the business has no choice. The flat company caused many companies into huge layoffs that are better in-house. For business, outsourcing results control of capital costs, increase efficiency, reduce labor costs, project new start is quicker, focus on business core, level the playing field, and reduce the risk for the business.
Gluck (n.d.) identified four benefits and three risks of outsourcing. The first benefit is to save money because of the increase of capital is appealing to the investors. The second benefit is alleviating the cost of the expense that produces competitive pricing. The third and last one are the benefits of core operations and resources near big businesses where managers can focus on another effort beneficial to the business. The three risks identified by Gluck (n.d.) are dubious accessibility where loss of productivity because the company is relying on others in running their business. The second risk is a loss of personal touch, and the last one is security breach because the people doing the job does not belong to the company and possibility of a breach is more than if you have internal employees.
According to O'Brien (2014), 2.7 million jobs were outsourced from the United States to China. A large portion is from the textile industry and posed loss jobs for millions of Americans. The company outsourced because of cheaper labor, less regulation, and less tax. For the domestic firms, the outsourcing creates a negative impact for putting domestic workers out of a job and sending the manufacturing job may lead the company to continue their manufacturing practices. In the global market, more and more companies take this option because it creates more profit and opportunities for the company.
For Hill (2015), outsourcing decisions pose plenty of problems for domestic business and even more for
ternational trade. In the global market, outsourcing decision obscures by the volatility of country's political economies, exchange rates, changes in relative costs and the like. The company needs to make or buy depend on the benefits to the business. The decision to make in manufacturing business can lower the costs, facilitates specialized investments, protect proprietary product technology, accumulate dynamic capabilities and improve schedule. The advantage of buy can be strategically flexible for the company, lower costs and offsets parts of the products. The decision to make or buy has trade-offs for the company.
If the advantages for the firms to make are not met, the risk of strategic inflexibility and organizational problems may occur (Hill 2015). Then, it will be best for the company to outsource rather than making it. Managers should make a wise decision that will benefit the business in a long-term. The fundamental objective of business is to make a profit and cost saving is important facets of any business. The firms should focus on what is important for them. If the benefits outweigh the cost, outsourcing is a good option to take.
You are required to answer in 200 words and in apa format.