outsourcing

definition and pros and conss

What is outsourcing?

Outsourcing is a business practice where companies delegate tasks or functions to external suppliers, enabling them to focus on core competencies while potentially reducing costs and improving service quality.

What are some advantages of outsourcing?

Advantages include significantly reduced staffing costs, reduced HRM costs, reduced existing workload, less investment risk, reduced capital needs, and increased profits.

What are potential disadvantages of outsourcing?

Disadvantages include poor customer service, employee demotivation, guaranteed quality issues, difficult implementation of JIT systems, communication breakdowns, loss of data security, and lost tax revenues.

What does 'offshoring' refer to in the context of outsourcing?

Offshoring refers to moving jobs outside the business, often involving employment overseas.

How can outsourcing lead to increased efficiency?

Outsourcing can lead to increased efficiency by allowing specialized outside suppliers to carry out work for lower costs.

Why might existing employees feel demotivated due to outsourcing?

Existing employees may feel demotivated if they believe their jobs are at risk due to outsourcing.

What impact does outsourcing have on capital needs?

Outsourcing reduces capital needs because there is less investment in new production facilities.

What communication difficulties can arise from outsourcing?

Communication can become difficult due to the physical distance between functional departments not being in the same building.

What is one risk of losing data associated with outsourcing?

One risk is the loss of security of data, as customer data may be made available to external organizations.

How can outsourcing impact research and development?

Lower costs from outsourcing can increase profits, allowing for more capital to be allocated towards research and development.