Use of Outsourcing in an Organization’s Strategic Supply Chain Strategy

Subject: Strategy
Pages: 2
Words: 316
Reading time:
2 min

Put simply, outsourcing is simply getting another company that is specialized in doing some kind of activity or service for you. This company offers to do so for a certain amount. It should be advantageous for my company due to the level of quality that they will offer to me. In effect, my company will be in a better-placed position to specialize in the expertise of my own people. Outsourcing makes enormous differences in the global market due to its ability to make companies concentrate on their own competencies.

Some of the advantages of this kind of trade include pointers like scale. New companies coming in as third parties keep units costs at a low. The company also does not have to invest otherwise in new manufacturing skills and capacity. In addition, outsourcing allows someone to open up access to new business locations, making the company expand its business wings to newer market areas. It does not end with that. The fact that the company has given a partner to provide a certain service allows for specialization. The advantage of specialization is the fact that technologically, a company grows in advancement. Better products will be manufactured at a lower cost and with less investment.

Nevertheless, there are certain risks involved in outsourcing. Without the knowledge of what the competitive edge is, it may be a loss if one will not know what the company’s differential is. Next, if one compares the scale of operating internally and finds that outsourcing will outweigh this scale, then one would rather not take the risk. This occurs better for companies that are big and well established. Finally, if the product contains certain uniqueness, which outsourced parties could not replicate, one is advised strongly to reconsider this move. A good example is the uniqueness of coke in the Coca-Cola Company.