I don’t want to pass up the opportunity to share an article I read about advantages and disadvantages of outsourcing in business. Below are a few highlights:
Outsourcing (sometimes referred to as “contracting out”) shifts tasks, operations, jobs, or processes to an external workforce, by contracting with a third party for a significant period of time. Businesses typically do this to reduce costs or improve efficiency. Outsourced functions can be performed by the third party either onsite or offsite of the business.
Sometimes a company experiences growth at a rate that it cannot support with its own, internal staff. To keep up the pace, the firm can choose to hire a pre-trained workforce from a third-party firm, to deploy as needed and where needed in its operations without interrupting its business flow.
Additionally, a company might have processes that only take place for a short time, making it much more efficient to hire a temporary, outsourced team of workers for completion. If the company implements a new process it can outsource the work to trained workers, instead of investing the time, money and effort to train and maintain internal workers.
Advantages and Disadvantages of Outsourcing
Outsourcing can free up cash, personnel, facilities and time resources. It can result in cost savings from lower labor costs, taxes, energy costs, and reductions in the cost of production.
- In addition to cost savings, companies may also employ outsourcing strategies in order to focus on core business competencies. This allows companies to devote more resources to what they do well, which can improve efficiency and increase competitiveness. Production can be streamlined and production times shortened while reducing operational costs.
While outsourcing has many advantages, it also presents some disadvantages.
- The relationship with the third party that takes on the outsourced functions must be managed. This includes negotiating and signing contracts, which requires time and the involvement of a company’s legal counsel, as well as the day-to-day communication with and oversight of the outsourced work.
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