class presentation lscm

8/2/2019 Class Presentation LSCM

1/15

Outsourcing


2/15

What is Outsourcing?

Outsourcing -

the strategic use of outside resources to perform

activities traditionally handled by internal staff

and resources Dave Griffiths

Why Outsource?

Provide services that are scalable, secure, andefficient, while improving overall service andreducing costs


3/15


4/15

Types of Outsourcing

Common processes outsourced are Purchasing

Logistics

R&D

Operations

Service management

Human resourcesFinance/accounting

Customer relations

Sales/marketing Training

Legal processes


5/15


6/15


7/15

Focus on core competency

Buyer can focus on its core strength

Allows buyer to differentiate from its competitors

Increased flexibility

The ability to better react to changes in customer demand

The ability to gain access to new technologies and innovation.

Critical in certain industries:

High tech where technologies change very frequently

Fashion where products have a short life cycle


8/15

Problems With Outsourcing

Loss of Control

Increased cash outflow

Confidentiality and security

Selection of supplier

Too dependent on service provider

Loss of staff or moral problems

Time consuming

Provider may not understand businessenvironment

Provider slow to react to changes in strategy


9/15

The risk concept Risk is an ambiguous

concept .

Risk denotes the precise probability of

specific eventualities .

Technically, risk has no value, so these

eventualities can be beneficial or adverse (i.e.

financial risk).

RISK = f (Probability, Consequences)


10/15

What is risk?

Risk :

exposure to the chance of injury or loss

hazard or dangerous chance

chance ofloss

degree ofprobability of such a loss


11/15

Risks in Outsourcing

Outsourcing can be risky

As many as half of all outsourcing agreementsfail because of inappropriate planning and

analysisErratic power grids, government difficulties,

inexperienced managers, and unmotivatedlabor can create problems

Failure to achieve unrealistic goals sometimescreate the impression of failure


12/15


13/15


Outsourcing Process

Identify non-core

competencies

Identify non-core activities

that should be outsourced

Identify impact on existingfacilities, capacity, and

logistics

Examples of PossibleRisks

Can be incorrectly

identified as a non-core

competency Just because the activity is

not a core competence for

your firm does not mean an

outsource provider is more

competent and efficient

May fail to understand the

change in resources and

talents needed internally


14/15


Outsourcing Process

Establish goals and draftoutsourcing agreementspecifications

Identify and selectoutsource provider

Negotiate goals andmeasures of outsourcingperformance


Goals can be set so highthat failure is certain

Can select the wrongoutsource provider

Can misinterpret measuresand goals, how they aremeasured, and what theymean


15/15


Outsourcing Process

Monitor and control

current outsourcing

program

Evaluate and give feedback

to outsource provider

Evaluate international

political and currency risks


May be unable to controlproduct development,schedules, and quality

May have non-responsiveprovider (i.e., one thatignores feedback)

Countys currency may beunstable, a country may bepolitically unstable, orcultural and languagedifferences may inhibitsuccessful operations

class presentation lscm

Documents