Making in-house or outsourcing is always important for every industry. If one firm can get more benefits from outsourcing than making in-house, the better strategy should be outsourcing. According to Kremic (2006), the main advantage which drives a firm to outsource is cost saving. In this highly competitive business environment, price/cost is always one method to stimulate demand and bring revenue (profit maybe not increase as well). However, is outsourcing the magic cure for every firm? Kremic (2006) also listed the risks of outsourcing like hidden cost or less flexibility. In my opinion, if one firm decides to outsource, it means that its supply chain will extend and more uncontrolled factors will add into this chain. These may cause more serious problems in bullwhip effect. So it is critical for management level to think deeply about outsourcing strategy, or it would be failure very easy like the Boeing 787 example.
Kremic, Tibor (2006). 'Outsourcing decision support: a survey of benefits, risks, and decision factors' Supply Chain Management: An International Journal, 11(6), p.567-482
Cost consideraiton is a valid and important decision criterion for outsourcing. There are cases that companies opt for outsourcing due to reasons other than purchase price, for instance because of qulity or reliability. Any specific examples?
Making in-house or outsourcing is always important for every industry. If one firm can get more benefits from outsourcing than making in-house, the better strategy should be outsourcing. According to Kremic (2006), the main advantage which drives a firm to outsource is cost saving. In this highly competitive business environment, price/cost is always one method to stimulate demand and bring revenue (profit maybe not increase as well). However, is outsourcing the magic cure for every firm? Kremic (2006) also listed the risks of outsourcing like hidden cost or less flexibility. In my opinion, if one firm decides to outsource, it means that its supply chain will extend and more uncontrolled factors will add into this chain. These may cause more serious problems in bullwhip effect. So it is critical for management level to think deeply about outsourcing strategy, or it would be failure very easy like the Boeing 787 example.
ReplyDeleteKremic, Tibor (2006). 'Outsourcing decision support: a survey of benefits, risks, and decision factors' Supply Chain Management: An International Journal, 11(6), p.567-482
Cost consideraiton is a valid and important decision criterion for outsourcing. There are cases that companies opt for outsourcing due to reasons other than purchase price, for instance because of qulity or reliability. Any specific examples?
ReplyDelete