Please help with my Research Part 3 paper

Drivers of Outsourcing

Of the different surveys conducted, it was found that the major causes of outsourcing fall into three major categories. First is when a company tries to cut costs or internal headcount. The second case is seen as a result of increased market demand constraining internal capacity. Thirdly, the situation could occur in the case where internal manufacturing or service performance is insufficient or does not meet the requisites. From the survey conducted, and that which can be seen in Figure 1 below, managers selected constrained capacity instead of cutting down on costs as the major driver for reviews. On the other hand, the subordinate may be assuming that outsourcing could be as a result of cost going out of line. For management to reduce the resistance from the employees, the best method would be to deliberately communicate the importance and objectives of each outsourcing program or activity (Fill & Visser, 2000).

Source: O’Keeffe, P. & Vanlandingham, S. (2004)

The Decision Making

To determine the item or task to be outsourced from the survey, consideration should be made on the following four items, as seen in Figure 2.

Source: O’Keeffe, P. & Vanlandingham, S. (2004)

Cost of Internal vs. External: These factors have to be taken into consideration, especially when making decisions on outsourcing. However, it is usually impossible to understand the resources to be outsourced, and many organizations will always struggle before they reach an agreement. Due to these unknown activities, the cost of production or the cost of the end product will always be affected. Total costs should be well worked out as they usually lead sub-costs indirectly in relation to the functions of outsourcing.

From the survey, the cost of internal vs. external was rated very vital by all groupings, apart from the top management. This is in line with the outsourcing’s top drivers in that it is top management always viewing outsourcing as a way to attain its objectives and goals.

Source: O’Keeffe, P. & Vanlandingham, S. (2004)

Risks of Outsourcing

Despite the fact that outsourcing is proven to be effective, it has some drawbacks which must be recognized and effectively managed. It is worth noting that in outsourcing, an outsider dependent on the company will have to perform designated business functions which, if it is not properly managed, will affect business operations or customer relations. Some of the negative impacts include the decline in on-time delivery outcome and end customer satisfaction as a result of delays on the part of outsourced material or tasks. Also, the quality of the product or service may have a tendency to decline, which in turn affects customer satisfaction. There is also the issue that budgets may not be achieved due to poor allocation and planning of resources (Broedner, Kinkel & Lay, 2009). Lastly, there may also be the issue of supply interruption due to inadequate finance by the providers.

References

Broedner, P., Kinkel, S., & Lay, G. (2009). Productivity effects of outsourcing. International Journal of Operations & Production Management, 29(2), 127-150. Retrieved from http://dx.doi.org/10.1108/01443570910932020

Dekkers, R. (2011). Impact of strategic decision making for outsourcing on managing manufacturing. International Journal of Operations & Production Management, 31(9), 935-965. Retrieved from http://dx.doi.org/10.1108/01443571111165839

Fill, C., & Visser, E. (2000). The outsourcing dilemma: A composite approach to the make or buy decision. Management Decision, 38(1), 43-50. Retrieved from http://search.proquest.com.proxy.davenport.edu/docview/212061448?accountid=40195

O’Keeffe, P. & Vanlandingham, S. (2004). Managing the risks of outsourcing: a survey of current practices and their effectiveness. Protiviti. Retrieved from http://www.protiviti.com/en-US/Documents/Surveys/ManagingOutsourcingRisks.pdf