Question

What are the benefits of strategic outsourcing? What are the challenges?

Answer 1

Strategic outsourcing provides the consideration for a company to make use of the present technology advancements in a company or production expertise of a company in order to outsource its non critical functions. It holds the following advantages:

1. Leverage the expertise and systems of highly efficient production lines.
2. Considerably improve resource utilization, especially for tasks that represent the company’s core competency.
3. With a focus on the core competence, the company can also focus on innovating.
4. With a higher level of production, the company can hope to satisfy demand at a much larger scale than earlier, at a reduced cost of operation, improving competitiveness in the market.

The following challenges can also be experienced:

1. The need to find the right supply partner exists, since there needs to be trust between the company and its contractors.
2. Quality becomes a compromise, especially since the contractor might not hold the same standard of results.
3. International law needs to be considered when operating with this mode in another country, as it can lead to legal problems in the later stages.

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