Operations Management - Outsourcing
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Operations Management OUTSOURCING INTRODUCTION Production and Operations Management is concerned with the problems of developing, producing, and delivering goods and services. Researchers focus on how to combine concepts, models, and data to help managers develop better systems and make better decisions concerning operations. Recent research in the area has focused on inventory, international operations, forecasting, information systems, logistics, purchasing contracts, outsourcing, and more. Today's highly competitive world business environment is forcing management to aggressively pursue ways to achieve efficiencies, improve customer service and save money. In their frantic search for new ways to streamline company operations, the concept of outsourcing "non-core" business processes and activities is a tempting new way to improve operations and costs. Management has become intrigued with the idea that they should be focusing on managing and controlling those key "core" business processes and activities that their organizations are best at doing and that represent the mainstay of the business instead of trying to dilute precious efforts in some of the business activities that do not represent the essence of the activities of the company. WHAT IS OUTSOURCING? Outsourcing is hiring someone whose expertise can perform a business function or activity better, more cost effectively and in a more timely manner than can be achieved in-house.
SIGNIFICANCE OF OUTSOURCING In today's competitive business environment, most of the companies are indulging in outsourcing. Firstly, Outsourcing helps in transformation process in an organisation by subcontracting, total outsourcing etc. For example, Nike utilizes an outsourcing strategy, using only subcontractors throughout the globe. Majority of their output today is produced in factories in China, Indonesia, and Vietnam, but they also have factories in Italy, the Philippines, Taiwan, and South Korea. Reebok, another leading footwear manufacture also utilize a 100% outsourcing strategy and manufacture their products throughout Asia. Secondly, by outsourcing companies can concentrate on their corporate strategy and operations priorities. IBM entered into a $5 billion manufacturing outsourcing arrangement with Sanmina-SCI, an electronics contract manufacturer. The agreement supports overall business strategy and operations priorities in both companies. Thirdly, outsourcing helps in product and process improvement activities by gaining advantage to latest technologies available through the vendor. For example, an outsourcing contract signed between Toyota Australia and Fujitsu helped Toyota gain access to the latest hardware and software, which improved product development. Further more, outsourcing helps managers to concentrate on core competencies. For example, Coca-Cola Amatil believes that outsourcing e-commerce allows us to focus on our core competencies rather than new technology.
* Verify credibility: before choosing the vendor, to whom the activities would be outsourced, company should ensure that the vendor has a good reputation in terms of stability, history, financial background etc. * Maintain control: Even though the company's activities are outsourced, the company must make sure that it retains enough control over the outsourced activities. CONCLUSION Today's volatile economy has forced most manufacturers to explore outsourcing. Many companies see it as an opportunity to reduce costs, improve flexibility and streamline production processes. As the face of business changes, more and more businesses are looking to reduce costs and share services. Not only are more and more companies looking to outsourcing as a management solution, but the range of services to be outsourced is also expanding and adapting. Hence, in a nutshell, if the right kinds of jobs or activities are outsourced to the appropriate sources, it would be very beneficial for the organization. Thus, many organizations are outsourcing various activities as it not only helps in lowering costs, but also provides better outputs that in turn increase the profitability and credibility of various organizations in their respective industries. REFERENCE LIST http://www.e-isn.com/manage_outsourcing.htm http://www.gxs.com/downloads/cs_coke2.pdf http://www.eedesign.com/pressreleases/bizwire/111519 ?? ?? ?? ?? MGMT316 Khalid Rashid 2548446 Page 1 of 10
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