Outsourcing, Offshoring, Insourcing
Outsourcing
Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure. As such, it can affect a wide range of jobs, ranging from customer support to manufacturing to the back office.
Advantages
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improved focus on core business activities
increased efficiency
Controlled costs
Increased in accessibility and affordability
Greater competitive advantage
Disadvantages
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Service delivery
Management difficulties
Lack of flexibility and instability
Examples
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Alibaba
Offshoring
Offshoring is the relocation of a business process from one country to another. Offshoring is typically an operational process, such as manufacturing, or supporting processes, such as accounting. Typically this refers to a company business, although state governments may also employ offshoring.
Advantages
Disadvantages
Examples
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Lower costs
Focuses on business development
Attain flexibility and business expansion
More control and less risks
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Lack of customer focus and engagement
Risk in exposing confidential data/information
Poor Calibration and synchronization
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Ford Motor Company (FMC)
Microsoft
American Express
Insourcing
Insourcing is the assignment of a project to a person or department within a company rather than to a third party. In practice, insourcing is used to describe a task or function that a company could have outsourced to a third party. As a rule, insourcing provides companies with more control over decision-making and the ability to move more quickly and precisely, especially if institutional knowledge factors into some elements of the job.
Advantages
Disadvantages
Examples
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Higher quality control
Allowed the ability claim e.g. “locally sourced”
Collaboration and knowledge sharing
Control of critical functions and skill sets
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Time-intensive
Requires more expense costs
Lack of flexibility
Greater risks of processing errors
Lazada
Louis Vuitton