Internal/External Sourcing Strategies

Internal/External Sourcing Strategies Paper

James L. Behrick

University of Phoenix

ISCOM/370

Leon Powell

October 31, 2010

This paper will differentiate between internal and external sourcing strategies in service and manufacturing organizations. In addition, the following issues will be addressed: advantages and disadvantages of global sourcing, the opposition of foreign outsourcing, defense of being opposed to foreign outsourcing, and the change of position that would take place if my organization mandated global outsourcing.

According to Bloomsbury Information, Ltd. (2010), “Internal and external sourcing is a choice between making or buying a needed item, or a decision on whether to produce goods internally or to buy them in from outside the organization. The goal of internal versus external sourcing is to secure needed items at the best possible cost, while making optimum use of the resources of the organization. Factors influencing the decision may include: cost, spare capacity within the organization, the need for tight quality and scheduling control, flexibility, the enhancement of skills that can then be used in other ways, volume and economies of scale, utilization of existing personnel, the need for secrecy, capital and financing requirements, and the potential reliability of supply” (Internal versus External sourcing, para. 1).

The global sourcing of goods and services has advantages and disadvantages that can go beyond low cost. Some advantages of global sourcing, beyond low cost, include: learning how to do business in a potential market, tapping into skills or resources unavailable domestically, developing alternate supplier/vendor sources to stimulate competition, and increasing total supply capacity. Some key disadvantages of global sourcing can include: hidden costs associated with different cultures and time zones, exposure to financial and political risks in countries with (often) emerging economies, increased risk of...