Advantages and Disadvantages of Outsourcing – Outsourcing | Operations Management

Advantages and Disadvantages of Outsourcing
Outsourcing | Operations Management
Management Notes

Outsourcing  is the process of contracting an external party for moving some of the firm’s internal activities and decision  making responsibility to outsiders.From the American Glossary, the concept of outsourcing has came ie;’outside resourcing’. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always.Outsourcing is also the practice of handing over control of public services to private enterprise.

S.No. Advantages Of Outsourcing Disadvantages Of Outsourcing
1.  Outsourcing helps to save the significant costs particularly for labor and also the overhead costs. Outsourcing increases the risk of losing sensitive data and the loss of confidentiality while for outsourcing processes  like payroll, medical transcriptions and insurance information.
2. Outsourcing helps in gaining outside expertise which can be a good source of innovation for improving products, processes and services. Outsourcing can lead to loss of management control of business functions which  mean that you may no longer be able to control operations of activities that you outsource.
3. Outsourcing gives business flexibility in staffing, manpower management, helps you save costs and can also pick the best people to run your core functions. Conflict can arise between the employees  in doing the work since the different participants do not share the same values, priorities, and culture as they come from different organizations.
4.  Outsourcing helps to get the work done faster which may allow the firm outsourcing to win orders by more quickly introducing new product and services. There may arise the problem of quality if the outsourcing provider doesn’t have proper processes and/ or is inexperienced in working in an outsourcing relationship.
5. Outsourcing helps you to get peace of mind as you outsource with a reliable individual or agency which handles the  tasks expertly and efficiently without you having to worry or lift a finger.
Outsourcing can create hidden costs and legal problems  if the outsourcing terms and conditions are not clearly defined.

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