Running head: JOURNAL ARTICLE REVIEW 6
JOURNAL ARTICLE REVIEW 6
Keshia Henry
Liberty University- BUSI 613
1
JOURNAL ARTICLE REVIEW 6
What Happens When You Outsource Too Much
Purpose
The single most important issue is determining which activities and competencies should
be kept internal and which ones can be safely outsourced.
Application of outsourcing activities
The increase in outsourcing revealed an increase in flexibility by being able to switch
suppliers and technologies, reduce lead times by taking advantage of concurrent engineering and
cut development costs while improving product quality by utilizing suppliers’ specialized
expertise (Becker & Zirpoli, 2011). Using a less integrated methodology where organizations go
further with outsourcing by using external providers for key functions and whole systems.
Organizations usually decide to outsource key functions and whole systems for the strategic and
competitive advantage within their industry. The use of this methodology will have organizations
losing a certain control factor in the overall performance and quality of their products.
Outsourcing key functions are whole systems can lead to mismanagement of new product
development. Mismanagement also means weakened abilities of the product process
development can Managers need to have an in-depth understanding and comprehension of the
performance objectives and technologies to have an accurate calculation of which activities to
outsource. The organization making the determination to outsource an entire system had to be
knowledgeable about the consequences and the missed opportunities by completing this type of
action. An organization will evaluate, calculate, and estimate every component
Background of Issue
Over the last decade outsourcing has become an increased trend especially from the
United States and Japanese organizations. Increased outsourcing of manufacturing activities has
2
JOURNAL ARTICLE REVIEW 6
become a prominent part of the restructuring of firms' supply chains since the 1990s (Kotabe,
Mol & Murray, 2008). Outsourcing is a cultivating trend and is more progressive approach for
organizations to cut costs, resources and increase competitive advantage. Outsourcing has it
disadvantages and can directly impact and affect organizational performance. Organizations
outsourcing major design and engineering element of their products or services causes the
company to lose internal talent. Losing talented and knowledgeable elements and personnel can
severely effect performance objectives, product integration, and balancing technical costs.
The motivation behind organizations outsourcing globally is that it creates a gateway to
expanding their market and consumer base. Organization that usually partner with one or more
local organizations in other countries through outsourcing offers them a competitive advantage
into that country’s market and industry. The core driver of the latest form of global outsourcing is
the increasing organizational and technological capacity of firms in decoupling and coordinating
a network of remotely located external suppliers performing an intricate set of activities (Kotabe
et al., 2008). The increase in organizational and technological capability is definitely an
advantage when it concerns the activities. However, those external suppliers are gaining the
expertise and familiarity with those activities that are being outsourced and therefore can leave
the organization exceedingly dependent on those suppliers. This gives those external suppliers
too much power and command over the originality of the product. More specifically when it
comes to product, technological, and strategic changes the need to be made but have to go
through numerous channels.
Managerial Implications
Executives should understand and appreciate the important roles that product designers,
engineers, and production managers, and purchasing managers, among others, play in global
3
JOURNAL ARTICLE REVIEW 6
sourcing strategy development (Kotabe et al., 2008). Managers need to have the subsequent
knowledge of each component and systems. Organizations and managers maintaining awareness
about which activities and tasks will be outsourced to best benefit the organization. As well as
making sure the organization preserves the talented personnel, performance objectives, product
stabilization and overall improvement.
There are three manager levels that exist within an organization which are account or
contract managers, operation managers, and middle or junior managers. Between these three
levels of management are affected by the outsourcing of activities and tasks and must maintain
the informal relationship between all organizations involved. The lowest level of junior managers
are responsible for day-to-day operations and supporting the outsourcing tasks and the transition
of the entire outsource process. The highest level of managers have the responsibility to maintain
and organize cost-profit relationship between the organization and outsourcing company.
The outsourcing relationships are often described in terms like “strategic alliance”
and “partnership”, which implies a positive relationship strategically forged between
the two parties involved. These positive connotations not only mask the true motive
and nature of the contractual relationships, but also conceal the tension and conflicts
in the process of managing these relationships, which are often a major source of
pressure for the managers as well as the workforce who are responsible for delivering
the services (Cooke, 2006)
These strategic alliances or partnerships require management to maintain high levels of
performance and resource costs. These relationships managers build between each other
concerning outsourcing activities will help develop component specific knowledge. Component
specific knowledge or otherwise known as “architectural knowledge” is when managers have the
4
JOURNAL ARTICLE REVIEW 6
knowhow to interrelate with products to accomplish different results. Within the implementation
of outsourcing activities managers need to smoothly integrate high level of performance. High
levels of performance is imperative and should be developed within the foundation of the
outsourcing strategic and tactical plan.
Summary
In response to the issue of managing which specific activities should be outsourced
requires fundamental strategic and tactical planning. Internal or external activities should be
separated into categories ranging from highest to lowest priority. When outsourced activities are
identified there still needs to be a control balance from managers to maintain talented and
knowledgeable personnel, cost of resources, and able to integrate systems. Maintain control over
activities that are highly interdependent with technologies that impact. These new relationships
can soon sail into difficulty when sensitive issues concerning cost and profit emerge that
often allow little scope for reconciliation (Cooke, 2006). Outsourcing can develop an
unconstructive impact on organizations if it is not implemented properly.
Three very specific factors that organization can apply to manage which are:
Developing component specific knowledge
Adopting mechanisms for technological renewal
Practicing learning by doing (Becker & Zirpoli, 2011)
These factors are an outline of an approach to accomplish successful outsourcing of
activities. Every organization will have to adapt these factors to fit their organization mission and
objectives but overall a version of these outlines should be in place in order prevent an over
outsourcing situation.
5
JOURNAL ARTICLE REVIEW 6
References
Becker M. C. & Zirpoli F. (2011). What happens when you outsource too much. MIT Sloan
Management Review. Retrieved from
http://search.proquest.com.ezproxy.liberty.edu/docview/845235674?pq-
origsite=summon&accountid=12085
Cooke F. L. (2006). Outsourcing of public services and implications for managerial knowledge
and careers. Vol 25. Iss 3. Retrieved from
http://www.emeraldinsight.com.ezproxy.liberty.edu/doi/full/10.1108/0262171061064818
7
6
JOURNAL ARTICLE REVIEW 6
Kotabe M., Mol M. J. & Murray J. Y. (2008). Outsourcing, performance, and the role of
ecommerce: A dynamic perspective. Industrial Marketing Manager. Vol 37. Iss 1.
Retrieved from
http://www.sciencedirect.com.ezproxy.liberty.edu/science/article/pii/S001985010700123
X
Young, G. (2014). Supply chain management. New York, NY: McGraw-Hill
Create.
7
Powered by TCPDF (www.tcpdf.org)
