Globalization and Outsourcing. Introduction Globalization Outsourcing Reasons for Outsourcing Pros and Cons Conclusion. Global Outsourcing and Off-shoring . Outsourcing:
Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider.
The client organization and the supplier enter into a binding agreement that defines the transferred services and terms.
Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client.
The client agrees to procure the services from the supplier for the term of the contract.
Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting.
Many companies also outsource customer support and call center functions like Tele Marketing, Customer Services, Market Research & manufacturing and engineering.
UPS and FedEx
Outsourcing and off-shoring are used interchangeably in public discourse despite important technical differences.
Outsourcing involves contracting with a supplier, this may or may not involve some degree of off-shoring.
Off-shoring is the transfer of an organizational function to another country, regardless of whether the work is outsourced or stays within the same corporation.
With the globalization of outsourcing companies the distinction between outsourcing and off-shoring will become less clear over-time.
The globalization of outsourcing operating models has resulted in new terms such as nearshoring and farshoring that reflect the changing mix of locations.
This is seen in the opening of offices and operations centers by Indian companies in the U.S. and UK.
Tariff if any
Choosing a single supplier
Choosing several qualified suppliers
A sourcing strategy in which the company uses a single supplier for a certain part or service in one area of business, and another supplier with the same capabilities for the similar part or service in another area of business.
Lower labor costs
Low investment risk
On - demand talent: product development and management skills available if not found in-house
Time-to-market improvement: Products can be launched closer to the point of consumption
Introduction of new and legacy products in new markets is more efficient, because of local familiarity with the market.
Potential security problems
Identifying qualified and reliable suppliers
Disruption of supplies
Low product quality and slow time to market
Difficulty in protecting confidentiality