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

WhatsApp

Google

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

Instagram

Louis Vuitton