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What is outsourcing?
Delegating one or more business processes to an external provider, who then owns, manages and administers the selected processes to an agreed standard
What are examples of processes which are outsourced by businesses?
Delivery/Logistics
Call centres
Computer systems
What choices are made by a businesses when outsourcing?
What should a business do itself?
What should a business buy in from others?
What are the benefits of outsourcing?
Access specialist suppliers with greater capabilities and higher quality
Reduce costs if outsourcing suppliers can provide at lower cost (e.g through economies of scale)
Focuses the business on its core activities- where it can ‘add value’
Makes operations more flexible- e.g., it easier to change capacity when needed
What are the drawbacks of outsourcing?
There is a risk that outsourcing supplier will fail to meet quality standards or otherwise not deliver
Potential loss of expertise from the business
There is no guarantee that costs will be lower
