Outsourcing and Global Sourcing
Explanation of key term and interest
Outsourcing is an activity where various companies strive to minimize there costs by transferring part f their work to outside supply rather that competing internally (Agerfalk, 2008). Outsourcing approach has always been employed as an efficient and cost effective strategy. This approach is appropriately applicable in cases where it is cheaper for a company to purchase products from supplier companies rather than manufacturing them internally. On the other hand, businesses may make a decision to outsource book-keeping duties to independent accounting firms, as it may be despicable than retaining an in-house accountant. Outsourcing can also be applied in cases where tasks and operations that could be carried within the organization are assigned to a third party for a given period o time. However outsourcing is not the act of hiring employees to perform temporary tasks within the organization.
Outsourcing is where business organizations are involved in the purchase of goods and services from oversees suppliers or the production of inputs abroad to lower production costs and improved quality of output. Global sourcing is also referred to the action where by business organizations perform a portion of there work by use of oversees employees. This usually happens when oversees labor costs are cheaper than those within the organization.
Global sourcing is used to refer to practices of outsourcing from global markets for goods and service across geopolitical backgrounds. The purpose of this activity is to exploit global experience in the delivery of goods and services. Some of efficiencies include cost effective skilled labor, low costs raw materials and any other economic factors such as tax breaks and minimal trade tariffs. There are various example of globally sourced products and this include production from law costs Chinese labor, low costs call centers staffed with English speaking workers in Philippines and India and many others
In the topic of module 7 discussion 3 Outsourcing and global outsourcing, am interested in learning about various factors that drive the outsourcing process , the advantages and disadvantages and how to use contract manufacturers as an approach for cutting down operating costs.
Comparison
During my research I have come across similar finings compared to what I have learned in module 7 discussions 4 outsourcing and global outsourcing. Outsourcing is the process where businesses organizations contract with external suppliers for products and services that were initially produced internally (Dankbaar, 2007). On the other hand global outsourcing is a is regarded as very vita]l aspect in the supply chain management where business acquire high skilled labor, quality products and from global employees in order to cut down on the production costs.
. Consequently during my research I have found that there are various forces that drive the outsourcing process. For instance outsourcing process is regarded as one of the main strategic framework for that has been employed in the supply chain management in both production of goods and services (Jerremy, 2007). Outsourcing has also been fueled by the magnificent levels of advanced technology which has facilitated accessibility of both local and global environments. These findings are similar to what I have learned in the course module. Conversely I have also identified that the fall of communism and the economic insulation maintained by this process is one of the main factors that drive this process.
In my research I have also found that there are some limitation associated with outsourcing and global outsourcing regardless of the strengths and benefits. For instance the third party whose production process has been allocated to, might rise to become future competitors, secondly the firm may end up losing its competitive advantage as a result of loss of production techniques and design ( Helpman & Antras, 2004).
However I have also come across a number of differences between what I have learned in class and what I have found in the course of my research. I have found that global sourcing can, also be referred to off show souring while the module doesn’t mention abut this. During my research I have identified that business organization employ sourcing and global outsourcing by mainly focusing on open sourcing soft ware(Gorg & Hanlry,2011). I have also found that open sourcing software is one of the most efficient strategies that can be employed by business organizations in the outsourcing and global sourcing. This is not similar to what I have learned in the module.
Article Summery
Agerfalk, P. J. (2008) Outsourcing to an Unknown Workfoce: Exploring Open Sourcing as a Goal Sourcing Strategy. Journal of Quarterly 32(2) 385-409 retrived fromhttp://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=126&sid=5e079f9c-88c9-456d-bdb6-9dc81c4a9d73%40sessionmgr13
The article illustrates psychological contract approach in the utilization of open sourcing development model as a means of global sourcing strategy. According to the article open sourcing is referred to the process where commercial companies and open source communities develop their commercial interest by joining forces. The theoretical approach for exploring systems outsourcing is derived from the open sourcing phenomena. The article further presents the early influential role of the psychological contract theory. This theory has been used in research on the employment relationship by featuring various information systems. However, an open source phenomenon is a newly emerged approach in global sourcing and does not guarantee success. There are many benefits associated with outsourcing and global sourcing, this include; reduced salary costs, diminished cycle time related to soft ware development, access to a large pool of highly skilled labor, increased proximity to customer and high levels of innovation and best practices .
Open souring has also been employed as one of the primary strategies towards application of global sourcing as business strategy .global sourcing has lead to technological frontier increase innovation levels . Consequently, outsourcing and global sourcing has fueled the technological gap between the developed and the underdeveloped countries. This has been brought by the fact that underdeveloped countries are persistently outsourcing.
Application
Outsourcing approach has always been applied by small business entrepreneurs a ay of getting things done without straining on the internal resources. This is mainly employed in the accounting process where these entrepreneurs decide to outsource activities such as bookkeeping rather than higher in-house employees to handle the payroll, invoice issues, post payments to the company vendors. Small businesses are able to face out needs of covering salaries, providing benefit packages and accounting through outsourcing process. Many authorities have been able to identify outsourcing as one of the strongest tools that can be employed to diagnose organizations financial from the bottom-line.
Annotated Bibliography
Dankbaar, B.( 2007). Global Outsouring and Innovation: The Consequence of Loosing Both Organizational and Geographical Proximity Journal of European Planning Studies..15(2) 271- 346 retrieved fromhttp://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=12&sid=5e079f9c-88c9-456d-bdb6-9dc81c4a9d73%40sessionmgr13
This article presents the proponent of strategic outsourcing that it pays to the benefit of successful practices. The article further argues that outsourcing n global sourcing is a very vital element in the maintenance of supply changing management. This strategy helps an organization develop a magnificent competitive advantage in terms of price, quality and innovation. This paper also illustrates how global sourcing has several dimensions that range from movement of manufacturing activities to low waste location to the movement of labor across various political boundaries. This paper also investigates a various implications concerning global sourcing as an innovative capacity of an outsourcing organization. It further agues how implications will become sound in the case of global sourcing in cases where there is loss organizational proximity.
Jerremy, S(2007).Addressing Impact of Outsourcing Oversees. Journal of Workforce Management. 66(21) retrieved from
http://web.ebscohost.com/ehost/detail?vid=4&hid=122&sid=5e079f9c-88c9-456d-bdb69dc81c4a9d73%40sessionmgr13&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=27947833
The article discuses about the political risks that have always been associated with outsourcing and how several companies have always considered wide range of the social and environmental effects associated outsourcing. The paper also talks about ways in which executives and various outsourcing service providers are striving to establish global outsourcing standards and the best practices that are required. The article about the role of global sourcing council and how it has tries to address economic problems in rural and urban areas. According to the article outsourcing and global sourcing has a social responsibility of promoting the economic opportunities for various individuals and groups around the world.
Gorg, G. & Hanlry, A. (2011).Services Outsourcing and Innovational: An Empirical Investigation . Journal of Economic Enquiry 49(2) 321-333 retrieved fromhttp://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=108&sid=79487c91-85bd-484c-af0c-3f1de5bcf4f7%40sessionmgr114
This article presents a comprehensive empirical evaluation of the connection between global service outsourcing and local outsourcing. The article uses plant-level data to analysis the profits and innovation level between this two forms of sourcing. The paper also identifies the befit associated with global outsourcing and describes ho this benefits have been transferred to the local form of sourcing in smaller magnitude. The article goes further to illustrate ways in which global sourcing has resulted to positive effects in the profitability and quality of productivity. The paper also identifies the forces that have always driven outsourcing over the past years, the paper also criticizes the theory view on the impact of international sourcing of the domestic. There are various theoretical claims that benefits from global outsourcing are equally transmitted in domestic souring while the paper criticizes this view
Helpman,E & Antras, P.(2004).Global Sourcing. Journal of Political Economy. 112(3)552-580. Retrieved from http://www.nber.org/papers/w10082
This article illustrates the North south model of international trade whereby goods and services are developed in the North. Sectors are populated by final manufacturers which have various skills in levels of production. Based on the levels of productivity and sect oral attributes business organizations may chose to link production with other intermediate or outsource them. The paper also illustrates how final manufacturers and suppliers should establish a relationship in various investments. The paper further describes the state of balance whereby companies with various levels o of productivity select structures of ownership and supplier location. This simply means that organizations select various organizational forms .
Agerfalk, P. J. (2008) Outsourcing to an Unknown Workfoce: Exploring Open Sourcing as a Goal Sourcing Strategy. Journal of Quarterly 32(2) 385-409 retrived fromhttp://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=126&sid=5e079f9c-88c9-456d-bdb6-9dc81c4a9d73%40sessionmgr13
This paper presents ways in which psychological contract approach has been used in open sourcing and similarly as a strategy for development of global sourcing. It also defines k the theoretical approach used by companies and open source communities, the paper also illustrates how open source has been employed as a strategic business strategy and fueled the level of technology
