BO7668 Strategic Operations and Outsourcing Sample
Introduction
Large scale corporations that have multiple operations running simultaneously to achieve business objectives often require support from external entities. This collaboration and that organisations committee refers to outsourcing where organisations higher or collaborate with a third party to carry out operations of the organisation on their behalf.
In most cases, outsourcing is done for customer care services which is a resource-intensive process as a result outsourcing allows organisations to focus their resources on more important work. In this regard, the following report would analyse how organisations implement the outsourcing process as well as various other outsourcing activities in which companies can engage to achieve competitive advantages and manage resources in the most effective manner. Furthermore, the report would also analyse the various factors that influence the decision-making areas linked with adopting outsourcing facilities.
Demonstration of how the organisation manages the outsourcing process, and analysis of the outsourced activities
The Outsourcing Process
The concept of outsourcing is a method that is being used by several international organisations as a business strategy. It has been noted that most international organisations are outsourcing some of the functions or materials which were earlier being performed by themselves. The operation of outsourcing is a process that could be performed by organisations internally by their organisation employees but sources from other organisations in a limited period of time (Damanpour et al. 2020).
The outsourcing method is being performed on-site as well as off-site of an organisation. It is being performed by several organisations to reduce cost, improve customer satisfaction and enhance efficiency and effectiveness in their performance in the market. Thus, it provides competitive advantages to the companies that are utilising the method of outsourcing. By adapting to the method of outsourcing, it has been stated that the management system of several organisations utilises the concept of a third party to perform non-core activities for the organisation (Sandhu et al. 2018).
Hence, it provides the organisation the ability to focus on specific core competencies which helps them to grow the performance level in the market. As a result, the third parties that are involved in the outsourcing process are able to produce lower costs and more effective results given their focus abilities. Therefore, it has been noted that the concept of outsourcing is derived from the American strategy of business which is outside the sourcing.
The organisation that provides services as an outsourcing facility is known as the service provider or a third-party provider. Thus, these companies use their resources and employees to perform the task given by specific companies to complete their facilities or external requirements (Li et al. 2018). This includes outsourcing information technology services, programs, application development, and technical support to the outsourcing company.
The concept of outsourcing is used by several organisations which are utilising the method for manufacturing processes, human resource tasks, and financial functions. There are three major types of outsourcing that are being used by several organisations to gain a competitive advantage in the market. The three major factors are onshoring, nearshoring, and offshoring.
The concept of onshoring is basically the locating work or services to low-cost locations in the company’s operating country (Clarke and Cobb, 2019). Whereas, the concept of offshoring is based on the method which is utilising or performing the work from other organisations from third-party organisations from overseas.
On the other hand, the concept of nearshoring is basically a method that is being utilised by organisations to relocate the programs or services to people in nearby areas. There are major advantages and disadvantages to adopting the method of outsourcing. While adapting to the method of outsourcing, the companies might witness advantages such as lower cost of operations and increased efficiency (Ivanovic et al. 2019).
By adapting to this method, major companies gain the advantage to make free resources that could be related to tasks or new projects. Companies that engage in the process of outsourcing have the ability to alter the process with third-party providers to ensure success. It also allows the firm to develop positive relationships with other businesses, which will help it stay competitive in the market in the long run.
Outsourcing, on the other hand, has its own set of drawbacks. Outsourced jobs give companies less control over certain issues. When it comes to outsourcing its call-centre function for customer care, it might result in a loss of control over the customer service provider’s quality. It also has the drawback of degraded quality in its manufacturing units and supply-chain delays.
As a result, the organisation will have difficulty carrying out the outsourced providers within the specified time frame. On the other hand, it has been noted that it also raises the company’s security risk (Calvão et al. 2021). To get the desired outcomes, firms using outsourcing providers must supply appropriate facts and data about the company and its need to their product supplier. As a result of the data interchange, the risks of sensitive information being misused grow.
The Outsourced Activities
As mentioned above, it has been noted that there are several organisations that have adapted to the concept of outsourcing methods in the organisation procedures. Thus, it results in providing several advantages to the companies in terms of performance. There have been several types of outsourcing activities that are being performed by several organisations in the market (Awe et al. 2018).
Hence, the six major outsourcing activities were based on professional outsourcing, IT outsourcing, manufacturing outsourcing, project outsourcing, process outsourcing, and operational outsourcing. These are the outsourcing activities that are being adopted by several organisations all around the globe. Professional outsourcing is a key activity that various organisations all over the world have chosen to boost their performance outcomes (Liu and Jayaraman, 2019).
As a result, professional outsourcing activities include accounting, managing a company’s legal aspects, making buying decisions, jobs linked to information technology, and administrative assistance for a company’s external services. It is one of the most prominent outsourcing activities that various firms are adopting since it offers a possible benefit in high-cost reductions.
As a result, the outsourcing firm provides the benefit of high-quality resources at a low cost. One of the most performed outsourcing activities which are being adopted by several organisations is the concept of IT outsourcing which involves outside organisations taking responsibility for the IT needs of a specific business (Pankowska, 2019).
Hence, it involves a range of software development, maintenance, and support of the company’s IT sector. Whereas, this activity of outsourcing provides technological advancement advantage to the outsourcing company.
Thus, it ends up being less expensive to contact the third-party IT management team to provide superior customer service and increase brand image. The third outsourcing activity involves manufacturing outsourcing services that are industry-specific (Ikumapayi et al. 2020). For instance, automobile manufacturers have outsourcing agreements for installing specific parts to their automobiles. As a result, the activity of manufacturing outsourcing helps the organisation to reduce cost and operational time which results in an increase in overall performance.
Hence, this activity also provides the ability to resolve quality issues and eliminate any type of interruption in the production line of the company. Therefore, it eliminates the procedure of continuous investment, updating the types of equipment, and adoption procedures to the latest technologies in order to complete the market demand.
Process-specific outsourcing activity, on the other hand, is a way that numerous organisations utilise to outsource specific operation-related components to other firms or units with a specialised reputation in that particular service (Porraskorpi, 2019). For example, bakery firms may contract with various courier providers such as UPS and FedEx to provide delivery services.
These outsourced operations are governed by a contract that specifies delivery dates, client contact information, and pricing information. As a result, it gives the company the capacity and strength to improve customer service while also lowering costs and speeding up processes. Thus, when a company is having difficulty managing one of its projects or simply finishing a section of a project, project outsourcing is an activity that various firms engage in.
As a result, numerous firms have been seen they would outsource their operation to a project management firm in order to achieve the desired end result at a cheap cost and with superior performance (Aswini, 2018). However, it has been observed that the majority of organisations that engage in this activity are those that do not have enough in-house workers with the essential expertise to complete the project.
As a result, completing the project in-house may cost more than outsourcing to a more qualified organisation. As a consequence, it has been reported that various organisations from all over the world are adopting the concept of outsourcing tasks, resulting in cost and time savings.
As a result of incorporating outsourcing operations into the management system, prominent corporations are seeing potential performance growth (Aswini, 2018). As a result, they understand the advantages of outsourcing individual projects or sectors of their organisation in order to increase production and operate a more effective company overall.
Critical evaluation of the factors influencing the outsourcing decision and process, and evaluation of the strategic and operational implications of the outsourcing decision
Organisations that commit to outsourcing activities need to identify the scope of outsourcing as well as the perceived benefits that can be achieved with the help of it. In this regard, a systematic decision-making process is undertaken by the organisation which helps the organisation Undertaker outsourcing activities (Elhoushy et al. 2020). Following are some of the factors that influence these decisions made by organisations for their outsourcing process.
Cost of operations
Cost of operation is by far the most influencing factor due to which organisations adopt outsourcing. There are several operations undertaken by companies that are resource-intensive and request a lot of overhead costs. One of these operations is customer care service which not only requires an extensive number of human resources but also requires the company to have an extensive amount of technology and networking hardware (Kayar and Bulur, 2019).
However, with the help of outsourcing customer care service organisations are able to minimise this cost of customer care service. Customer care services departments are responsible for addressing the concerns of customers and large-scale corporations can receive thousands of queries on a regular basis, as a result, it is essential to maintain a large workforce which can effectively address these queries.
That customer care service department also required an extensive amount of IT hardware and skill set which required extensive financial investments (Ishizaka et al. 2019). However, it has been seen that with the help of outsourcing customer care services 46% of companies are able to acquire customer care skill sets and services that they are unable to acquire within their existing workforce (Apollotechnical, 2022).
Moreover, 45% of the organisations are also found to outsource their customer care service to a third party which is not only cost-effective but also helps to minimise liabilities linked with human resource management (Apollo Technical, 2022).
The cost of labour is another factor due to which outsourcing activities are carried out as a result organisations adopt customer care services from other countries where the cost of labour is comparatively low. India is one of the leading IT Tech solutions providing companies and has several companies like Wipro, TCS and others providing outsourcing services to companies in other parts of the world where the cost of labour is high.
Customer care service providing facilities are rapidly growing in the global market and it has been estimated that the growth rate of this industry at present is at a CAGR of 3.51% (Apollo Technical, 2022). The global industry for outsourcing services from third-party solution providers is estimated to be $75.1 billion out of which customer care service is the most popular outsourcing service utilised by global companies (Apollotechnical, 2022).
Apart from global organisations utilising customer care service and outsourcing facilities for minimising their cost small scale companies also rely upon outsourcing facilities. It has been identified that 18% of small-scale companies resort to third parties for providing non-core operations which essentially involve customer care service (Apollo Technical, 2022).
Outsourcing facilities are particularly useful for small scale companies considering the fact that maintaining a separate department for customer care service can become quite resource-intensive and might not be financially feasible (Ayaad et al. 2022).
Access to technology and resources
Outsourcing not only helps companies reduce the cost of operation but also helps companies to access technology and resources that are not present within the company’s core (Mubako, 2019).
For instance, if an organisation is willing to develop an application for their business and the company does not have an experienced app development department then outsourcing and collaborating with a third party effectively helps them in the development of the application (Espino-Rodríguez and Ramírez-Fierro, 2018).
Another area of technology and resources that companies outsource is marketing. There are companies that specialise in providing marketing campaigns to small and large companies and this effectively helps organisations to get access to technology and advanced resources which can help companies to maximise their marketing capabilities (Lins et al. 2019).
Outsourcing marketing services from third party organisations helps companies to focus their existing resources on more important objectives and core operations. For instance, if an organisation does not outsource services like customer care service to a third party, then a substantial amount of the workforce gets divided for this operation.
While, on the other hand, if outsourcing facilities are utilised by companies, then 100% of their workforce can be focused on the code operations which effectively increases the company’s efficiency in terms of product and service development (Aamer, 2018).
Apart from that in the present generation where technology is playing a major role in helping companies to accelerate their business operations technology such as artificial intelligence, machine learning, big data and blockchain are becoming much more popular than ever.
Every organisation operating in a competitive market environment do not have all these technology resources and capabilities within their core functions and this is where outsourcing these facilities from third-party vendors can effectively help companies to achieve a competitive market against other organisations in the same market (Espino-Rodríguez and Ramírez-Fierro, 2018).
Achieving deadlines
Achieving deadlines is another factor in which companies decide to hire third-party vendors. There can be instances where companies might have the coal competencies to carry out a particular operation however in a project that involves a fixed timeline outsourcing operations can effectively help organisations to achieve their objectives within the given timeframe (Agrawal and Singh, 2020).
Dividing the work within a fixed deadline project helps organisations to effectively carry out resource management as a result of which deadlines are achieved without requiring the organisation to worry about dividing its existing workforce for different operations.
Hedging liabilities
Organisations operating in the global market are linked with various operations undertaken by the company. In this regard outsourcing services can effectively help other companies to minimise the liabilities of the organisation to a particular resource (Kavosi et al. 2018).
For instance, if customer care service is outsourced by a company, then the company is not liable for paying the healthcare insurance and other benefits to the employees of the outsourcing vendor which effectively helps in reducing a lot of overhead costs.
Similarly in other outsourcing activities specifically in construction where risky operations are involved such as installation of machinery servicing machinery and other critical tasks, outsourcing can help the liabilities of the organisation towards the individuals working on the particular operation (Mi et al. 2020).
For instance, if an individual involved in the installation of heavy machinery gets injured the organisation would be responsible for paying the healthcare costs. However, if the same operation is outsourced by the organisation and the individual gets injured then reliability rests upon the third-party vendor and the company effectively benefits from capability (Munjal et al. 2019).
Apart from that, by getting access to outsourcing facilities from third-party vendors organisations are able to effectively reduce finances which is another benefit of outsourcing which turns out to be a key factor in terms of decision making.
However, in this regard organisations need to identify vendors to have specific conditions regarding the services that they provide (Zheng et al. 2019). If the outsourcing vendor dinner is liabilities for operation failure or injuries that might occur then it transfers the risk back to the company before recruiting a third-party company for an operation it is essential to lay down the terms and conditions and come up with a suitable agreement.
Recommendation
- Based on the above study it has been identified that outsourcing facilities can effectively help organisations to minimise the cost of operations and in this small-scale companies can outsource their customer care service facilities. Outsourcing for customer care service can be specifically beneficial considering the fact that it can help them to achieve more exposure and satisfy the limited number of consumers in the most effective manner.
- It is also essential for organisations to identify particular areas within the company’s operations which can be benefited with the help of outsourcing. In this regard, organisations need to identify resource-intensive operations and the cost involved in the overall operation. This can help organisations to decide if outsourcing this particular operation from a third-party vendor can help them minimise the existing cost.
- Before hiring a third-party vendor as a part of outsourcing companies both small and large need to verify the terms of operation and services offered by the third-party vendor. This can effectively help organisations to minimise any underline it is of hiring a third-party company for handling core operations of the business
Organisations also need to monitor the operations carried out by the third-party vendor in order to ensure that they are following the objectives and directives provided by the company which is essential in terms of maintaining consumer satisfaction. Organisation assured sector customer care service provided by third party company to ensure that the outsourcing company is effectively resolving the queries of the customer.
Conclusion
Based on the above findings linked with outsourcing it can be clearly identified that outsourcing facilities and services are beneficial for organisations at all levels. The Report has also identified the various critical operations involved in the outsourcing process where the company needs specifications to help them in improving their performance in the market.
The report has also helped in understanding that decision making plays an important role in identifying a particular outsourcing services which can benefit an organisation’s core competencies and performance in the market. In this regard, there are various factors which have been identified that influence the decision-making process of which minimising cost with the help of outsourcing has been found to be the most important factor.
Moreover, factors such as risk transfer and effective resource Management are other factors which influence the decision-making process of organisations willing to adopt outsourcing facilities for enhancing their overall performance and capability in the market.
Reference
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