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Reading 24: Outsourcing Onshore or Offshore? - Coggle Diagram
Reading 24: Outsourcing Onshore or Offshore?
OUTSOURCING IS AS OLD AS SOCIETY
sometimes it is deemed desirable that certain activities are undertaken by outsiders
quality can be a key consideration as well as cost
outsourcing = the devolution of operations to third parties, while retaining responsibility for it
THE GROWTH OF OUTSOURCING
in the last 50 years, the list of outsources services has grown dramatically
top reasons to outsource in order of importance:
increase variable cost elements
access to skills
improve focus
grow revenue
reduce costs
improve quality
conserve capitali
nnovative
businesses can outsource many elements of the value chain
many businesses have changed their structure and shape fundamentally through outsourcing
globalisation has aided in outsourcing
many businesses have moved their outsourcing offshore due to technology advancements and freedom of capital movement
THE RISKS OF OFFSHORING
distance
increased transport costs
increased time in the supply chain
different time zones can be an isue
currency
risk if exchange rates move if pricing is set to local currency
legal system
local rules and regulations can impose a significant extra burden
good outsourcing requires understanding of the legal implications at home and abroad
political or economic instability
risk of serious disruption to the supply chain
need to be able to guarantee security
quality and reliability of services
availability, skills and education of the workforce are fundamental in deciding on a suitable location
also important to have access to relevant infrastructure, expecially power and telecommunications
language and culture
can provide barriers
use of translators and interpreters can impose extra costs
can slow down resolution of problems
many companies will avoid countries where bribery is part of the culture
risk of damage to the brand
using 'sweat shops' may provide cost savings, but be unacceptable to the value espoused by shareholders
labour issues include:
living quarters
length of the working week
conditions of the workplace
use of child labour
THE ASSESSMENT
some businesses prefer to choose a destination closer to the core business or market
inadvisable to choose an offshore location purely from a cost standpoint
need to consider the options from experience in outsourcing based on the country's share of the outsourcing market