Advantages and Disadvantages of Outsourcing of Us Product

Table of contents

Abstract ----------------------------------------------------------------------------- 2

Introduction ------------------------------------------------------------------------- 2

Advantages and disadvantages of outsourcing --------------------------------- 4

Step in successful outsourcing ---------------------------------------------------- 8

Signs in changing trends ----------------------------------------------------------- 9

Conclusion --------------------------------------------------------------------------- 10

ABSTRACT

Outsourcing is not a new or alien phenomenon in the US. Almost every organization outsources some aspect of its business. A paint company may outsource the manufacture of its paint cans; a mobile network may outsource its billing activity; a hospital may outsource medical waste disposal; an auto manufacturer may outsource servicing; and an IT company may outsource its janitorial services. Outsourcing is really about letting experts do what they do best, leaving the business to focus on its core strengths.

Outsourcing has become a major trend in human resources over the past decade. It's the practice of sending certain job functions outside a company instead of handling them in house. More and more companies, large and small are turning to outsourcing as a way to grow while restraining payroll and overhead costs. Factors like lower costs, improved productivity, higher quality higher customer satisfaction, and ability to focus on core areas are some of the benefits of outsourcing. However, there are many advantages and disadvantages associated with outsourcing. In this paper, I briefly discuss the advantages and disadvantages of outsourcing.

INTRODUCTION

 Over the past four decades, outsourcing has evolved and it now offers businesses many options and alternatives. Companies can look to on or offshore providers and they can outsource an activity, function or process. In US Outsourcing has been growing dramatically during the recent years. Contemporary highly competitive environment in which today’s businesses operate acts as a strong stimulus for firms to outsource. In addition, economic globalization facilitates the process of searching for opportunities on the open global market to outsource some of firms’ activities instead of performing them on their own.

“Do what you do best and outsource the rest” has become an internationally recognized business tagline first “coined and developed” in the 1990s by the “legendary management consultant” Peter Drucker. The slogan was primarily used to advocate outsourcing as a viable business strategy. It has been said that Mr. Drucker began explaining the concept of “Outsourcing” as early as 1989 in his Wall Street Journal (WSJ) article entitled “Sell the Mailroom.

In today’s global business competitive environment, business organizations must innovative and adapt new strategies to sustain revenue generation, value while remaining competitive. Organizations have embraced outsourcing principles and adopted them to help in expanding to new markets. Outsourcing has enabled US multinational corporations to reduce costs and compete effectively in the global market. While the proliferation of outsourcing has been beneficial to short term growth by taking advantages of; low wages, taxes and investment incentives in developing countries, it will significantly dissolve the competitive advantages the United States enjoys. The outsourcing approach changes the historical model of economies of scale, the resulting intangible and hidden trade costs of outsourcing shall have a heavy bearing on the US economy. The competitive advantage of high technology, support for startups will be gradually eroded, enabling developing countries to compete directly with the United States.

Economist view outsourcing as new form of international trade. Currently more commodities are traded than it was in the past, this can be either good or bad from differing perspectives. Most Americans hold the assumption that jobs, skills, money, and experienced are being shipped to foreign countries, and recipient countries are making financial, socio-economic and development progress while the U.S economy stagnates. This view has been strongly expressed leading up to the last two presidential elections, with candidates pledging to bring back “jobs”.

Consumers have been accustomed and aware to the fact that significant proportions of manufactured goods are produced abroad by corporations taking advantage of low production costs. A new trend catching is outsourcing services with India taking a huge chunk of call centers catering for the American consumer.

The notable divisions which companies outsource are customer support, human resources, accounting and manufacturing. This has not been limited to these divisions, skilled personnel in information technology, engineering, pharmaceutical and Research and Development are facing greater threats to losing workers abroad. No American worker or politician is keen on promoting outsourcing. For example, a software engineer at an Information Technology firm can embrace the thought of losing his/her job to an engineer in India, willing to take half of the pay.  There is the prediction that by 2016, more than 3.3 million white-collar jobs and wages amounting to over US$136 billion shall be lost in the economy. In addition the economy will be affected by worker dissatisfaction combined with risks occurring as a result of outsourcing.

The resolution to outsource is most arrived at the interest of lowering firm’s operational costs, increasing competency, making efficient use global capital, labor, scarce resources, infrastructure and technology. Outsourcing differs from off shoring, it is relative to the firm restructuring and organization of labor within and between societies. Off shoring takes place when a segment of production process is moved off shore; sold or still under the control of a national firm.

Companies outsource tactically to reduce and control operational coasts, am most importantly increase profits. Access to low operation costs, college-educated workforce at a fraction of U.S national’s wages compels firms to take advantage of short-term outsourcing benefits. Partnership with other organization abroad provides U.S companies with access to new technology, tools and techniques that they may not posse, structured methodologies, procedures, documentation, and expanded skills offering competitive advantages. The partnership between Apple Inc. and Foxxcon Group provides a good example, in this arrangement Apple is freed up from manufacturing while taking advantage of Foxxcon capabilities. Outsourcing has been used successfully to achieve cost saving propelling companies to venture into foreign markets, these benefits however, do not offset the projected long-term impacts on United States industries and the economy.