Question

What are the pros and cons of outsourcing? When is it desirable and necessary?

Answer 1

Outsourcing is defined as getting goods or service from outside vendors.

Pros:

1. It can result in lower costs.

2. It can bring more efficiency as outsourced organization have better expertise in this domain.

3. It allows organizations to focus more on their core competency.

4. It can help companies save on infrastructure and technologies. As the product or service is outsourced, companies are not required to build or maintain any infrastructure and invest in any new technologies.

5. It can lead to better customer service by selecting outsourced supplier nearer to the customer.

Cons:

1. It can lead to quality issues.

2. Extra resources required to maintain quality checks.

3. Increased transportation due to goods coming first to the organization from external supplier and then going to the customers.

Outsourcing should be done when it involves non-core competency for the company and by outsourcing it can lead to better efficiency, lower costs and increase company focus on its core competency.

This format mainly suitable for the companies like Mc.Donald's who offer franchise and need a strict control over the way in which products and services are created and delivered so that customers can get same experience at every outlet.