All About Outsourcing
Outsourcing can be defined in many ways. A definition from the Guide to Outsourcing in Supply Chain Management states, “We can define outsourcing as the process of moving aspects of your own company to another supplier” (169 Scott, Lundgren & Thompson, 2011). Ethanan Helpman from Harvard University defines it as “to refer to the acquisition of goods or services from an unaffiliated party” (127, Helpman, 2011) and Ashsiha Oza and Kathy Hill from Sam Houston State University define it as “turning over all or part of an organizational activity to an outside vendor” (15, Hill & Oza, 2007). Based on these definitions, outsourcing is the hiring of a third party to help with business. When discussing outsourcing, there are advantages and disadvantages along with a process that is followed when choosing a company to work with. Outsourcing is something that has both advantages and disadvantages just like anything in life. One advantage of outsourcing is that it can, as Forbes.com authors Michael Heric and Bhanu Singh discuss, “tap into global talent” (1, Heric & Singh, 2010). Having a department in which a company is unable to find qualified employees can be a problem but outsourcing allows the company to now have these people at their disposal so the company can grow. Today companies are outsourcing the IT department to India and China due to the amount of engineering graduates from these countries (17, Hill & Oza, 2007). These graduates are very knowledgeable of the IT field and having them work on a website, server issues or anything else related to IT would help the company greatly. Another advantage is that it “builds partnerships” (1, Heric & Singh, 2010). When building these partnerships the company needs to make sure that they don’t just give the “3rd Party Logistics (3PL) provider” (169, Scott, Lundgren & Thompson, 2011) all of the work with no direction but instead give directions and be involved with it all. The company does not have to do all the work but must continue to look over the work verifying that things are being done accurately and in a timely manner. To do this, companies can send an employee to the outsourcing company for training and also have frequent meetings and calls with them as well. This also allows the outsourcing company be more comfortable asking questions as well as the management staff familiarizing themselves with the outsourcing workers. Once this partnership is constructed, they can seek each other for help in the future with already knowing that they will be getting quality work from each other. The biggest advantage for outsourcing is the “cost advantage” (17, Hill & Oza, 2007). In the US an employee’s monthly salary is around $2,500 where in India, it is only about $400 (17, Hill & Oza, 2007). When companies outsource, they are able to either put money they are saving towards a different aspect of the company or they can just have more revenue at the end of their fiscal year. Even though these companies are saving money, they are not neglecting anything but instead the companies are doing what is necessary but in an inexpensive manner. Even though cost is the biggest advantage of outsourcing, it is also a disadvantage for people trying to gain employment in the United States. People may live in the same country as the company but not even get a chance to be interviewed for the position because the 3PL company is in another country. Outsourcing is a big controversy in the United States because of the current economy. When a company outsources their business to another country, the United States loses tax revenue which puts a burden the on the middle class America. An example of how outsourcing can negatively affect the United States would be what happened to the US Olympic parade uniforms for the 2012 US team. Ralph Lauren had designed the parade uniforms but the issue was that China had manufactured them...
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