OUTSOURCING AND COST REDUCTION

Outsourcing and Cost Reduction

[Name of College]

Executive Summary

Outsourcing is an increasingly common response to the question make or buys. The outsourcing, combined with other techniques, is creating a sophisticated brand, new in the customer-supplier relationship. This study has made some suggestion using a particular case in which a company has decided to outsource its in-house catering services. This study after analyzing the importance of outsourcing as well as risk associated with the outsourcing has developed a plan to help company outsource the services. In this connection this study has made some suggestions that the company should mention all the required terms in the contract and should outsource the in-house catering partially that is company should assign a manager to monitor catering activities in order to ensure that employees are served with quality food. This will help company to minimize the risks associated with outsourcing along with helping company to ensure the attainment of outsourcing objective.

Outsourcing and Cost Reduction

Introduction

Outsourcing is an innovative management technique, which involves the transfer to third parties of certain complementary processes that are not part of the main line of business, allowing business to concentrate more on core activities in order to obtain competitiveness and tangible results. This technique is based on a management process that involves structural changes in the company in which key areas of business such as culture, procedures, systems, controls and technology or any other business activity is outsourced (i.e. assigning a third party through contract to perform any specific non-core business activity of the business). The goal of outsourcing is to get better results by concentrating all efforts and energy of the company's main activity. Harrell (2010) define outsourcing as a process of streamlining and economizing production processes, so that core business activities can be focused in order to achieve competitive advantage. “Show maker for shoe,” the term outsourcing perfectly correspond with this aphorism, although McKinney (2009) claims that outsourcing is an alternate for this apothegm. This in practice means to find suppliers or manufacturers in order to ensure the delivery of goods / services from professionals with intentions to shift the focus of management more on the main business activities than others. Outsourcing is an increasingly common response to the question make or buys. The outsourcing, combined with other techniques, is creating a sophisticated brand new in the customer-supplier relationship. Through this relationship, close cooperation between client and provider is also sought.

This paper will attempt to explore the key factors that a manager should consider while making the decision make or buy, and the risk associated with outsourcing any business activity. In this connection, a particular scenario of outsourcing is selected to be examined according to which, “an in-house catering operation is being outsourced to a private sector company with a goal of cost reduction. What are the key factors that managers will need to consider for ensuring the success of the transfer?” This study will consider people, operations and technology factors that will need to be addressed, while ...