Outsourcing

• Outsourcing


  Contracting a business process out to an external provider
• Examples of business processes that can be outsourced

  • Finance department - Payrolls
  • HR department - Training staff
  • Marketing department - Social media management
  • Operations - Production of a component
• Advantages of outsourcing

  • Using a specialist for higher quality
  • Potential for lower costs due to not having to pay full-time employees or invest in machinery
  • Possibility of lower prices leading to higher demand or increased profit margins
  • Scale advantage and economies of scale leading to lower costs
• Outsourcing allows businesses to focus on their core competencies and eliminate unnecessary distractions
• Loss of control over the outsourced process is a disadvantage of outsourcing
• External providers may only do the bare minimum and not innovate or help improve products, leading to potential issues
• Ethical issues may arise when outsourcing, impacting the reputation and supply chain of the business
• Over-reliance on external providers can lead to increased supplier power and potential cost increases