outsourcing

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Outsourcing

Purchasing a significant percentage of intermediate components from outside suppliers.

Outsourcing

The practice of a company hiring a different company to supplement its services at a lower cost. For example, a company may outsource its accounting to another firm, which would then prepare and provide appropriate statements for the company. Likewise, an automobile manufacturer may buy auto parts from another company and use them to make its own cars. Companies outsource in order to reduce their costs and thereby reduce the prices they charge for their goods and services. The practice is somewhat controversial, especially as some companies in the developed world outsource to firms in other, often developing nations. Critics contend that this drives jobs out of the home country, while proponents argue that this benefits consumers.

outsourcing

the buying-in of components, finished products and services from outside the firm rather than self supply from within a firm. In some cases this is done because it is more cost-effective to use outside suppliers or because outside suppliers are more technically competent or can supply a greater range of items. For example, in 2000 the Bank of Scotland signed a 10 year outsourcing agreement with IBM which involves IBM taking over the Bank of Scotland's computer systems and operating them. The deal will enable the Bank of Scotland to ‘save’ up to £150 million on its information technology (IT) costs as well as being able to draw on IBM's expertise to create a more technically advanced IT infrastructure than it could have achieved on its own. On the debit side, however, reliance on outside suppliers may make the firm vulnerable to disruptions in supplies, particularly missed delivery dates, problems with the quality of bought-in components, and ‘unreasonable’ terms and conditions imposed by powerful suppliers. See SOURCING, INTERNALIZATION, MAKE OR BUY, VERTICAL INTEGRATION, VIRTUAL CORPORATION.

outsourcing

the buying-in of components, finished products and services from outside the firm rather than self-supply from within the firm. In some cases this is done because it is more cost-effective to use outside suppliers or because outside suppliers are more technically competent or can supply a greater range of items. For example, in 2000 the Bank of Scotland signed a 10-year outsourcing agreement with IBM that involved IBM taking over the Bank of Scotland's computer systems and operating them. The deal enabled the Bank of Scotland to ‘save’ up to £150 million on its information technology (IT) costs as well as being able to draw on IBM's expertise to create a more technically advanced IT infrastructure than it could have achieved on its own.

On the debit side, however, reliance on outside suppliers may make the firm vulnerable to disruptions in supplies, particularly missed delivery dates, problems with the quality of bought-in components, and ‘unreasonable’ terms and conditions imposed by powerful suppliers. The decision to produce internally or outsource will depend upon the combined production costs and TRANSACTION COSTS of the alternative supply source. See TRANSACTION, INTERNALIZATION, MAKE OR BUY, VERTICAL INTEGRATION.

References in periodicals archive ?
Our second archetype--exemplified by CHEM2 and RUBBER--also results in a financial insourcing success, but the route to success is very different.
Out of this analysis will emerge clear insourcing opportunities.
Industry advocates point to Defense Secretary Robert Gates' comments in August--when he disclosed that insourcing was not saving as much money as he thought it would--and a recent memorandum by Army Secretary John McHugh that calls for tighter oversight of insourcing as evidence that the policy may have overreached.
This predisposition with respect to insourcing has decreased over time; however, no temporal change in the adoption of packaged software is observed.
call center insourcing firm specializing in Customer Relationship Management (CRM) and Customer Service Selling (CSS).
Upon gaining an understanding of the fundamental advantages and benefits that both outsourcing and insourcing offer, a sponsor should next evaluate whether the involvement of a strategic resourcing partner will enable it to meet its project and submission objectives.
OMB said pilots were selected based on several criteria, including the potential erosion of in-house capability, insufficient contractor oversight, or the potential for improved performance or cost savings through insourcing.
His visit comes on the heels of Master Lock being recognized in his recent State of the Union address for its insourcing efforts.
We are happy that the issue of manufacturing and insourcing continues to be a priority for President Obama," Heppner said.
The report says insourcing is justified in three general categories: inherently governmental jobs; core competencies; and long-term requirements, such as clerical work.
Clients that select STATConnect for their clinical trial statistical analysis needs will greatly benefit from our Insourcing statistical model.