Outsourcing (contracting work out) occurs when a producer acquires goods or services from an external supplier rather than producing them internally. The main reason we decided to use a third party in the production of Yellowtail products is because Australia is expected to experience drought in the forthcoming years which would greatly challenge the production of wine in the country, as well as because petroleum costs are expected to further rise which would negatively impact logistics costs for our company by increasing them considerably. All this would diminish our effectiveness, limit production, as well as reduce our revenues and hence profits. Outsourcing would, in addition, bring our company numerous advantages, including reduction of labor costs as wages would be lower in the chosen countries, lower manufacturing costs, speeding up of the production process, gaining access to world class capacities, improving company’s focus, reduced taxation levels, better stock management, utilizing internal resources for other purposes, decreasing in-house investments, and sharing of risks. Although there are also certain disadvantages from outsourcing, such as less efficient communication, inadequate governance, loss of leadership and control, increased external supplier dependency, external supplier increased influence on success or failure of outsourcing, possible cost alternations, end-user resistance to changes, unethical external supplier behavior, increased risks, security issues, loss of jobs and undesirable results, we believe that the advantages that would be gained would greatly outweigh the possible disadvantages. Furthermore, we have decided to adopt certain techniques, which would help us ensure overcoming of the drawbacks of outsourcing such as: contesting for an external partner who provides highest levels of efficiency, security, quality, effectiveness, capabilities, loyalty, trustworthiness, and reputation; using detailed agreements...
Please join StudyMode to read the full document