Bus 644: Operational Management

The Advantages and Disadvantages of Outsourcing

BUS 644: Operational Management

May 4, 2015

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Introduction

In today’s’ society, people purchase products from all over the world with just a click of a button online, or by just going to any local store and picking up whatever item they need. This could be anything from chicken for dinner to tires for their car. Products and services stay in high demand on a regular basis. In order for companies to meet the needs of the consumers, many companies have begun outsourcing to low cost countries. “Outsourcing is a practice used by companies to reduce costs by transferring portions of work to outside suppliers.” (Sheng, 2014) These outside suppliers are usually hired in developing countries because the cost for workers is much cheaper. “One reason companies decide to outsource is that the goods or services can often be obtained less expensively from outside suppliers”. (Vonderembe, 2013)

In this paper, the trade-offs between inputs for the productivity improvements will be analyzed as well as the advantages and disadvantages of global sourcing versus producing in the U.S. Examples will also be given of low cost outsourcing products and recommendations of inputs, trade-offs and going global advantages.

Analyze the trade-offs between inputs for the productivity improvements.

When a product is in high demand, the company has to meet that demand in order to stay competitive in that particular market. “When organizations increase the number of customers served, there are opportunities to achieve lower cost and higher productivity through economies of scale.” (VonderembSe, 2013) When this factor is in play, companies usually look for the cheapest and fastest way to get the product in the hands of the consumer at a low cost and ship them to the customer at a low rate. The trade off to doing this is that the productivity improvements might be affected in a fast paced setting or...