Outsourcing is an important business strategy that provides new development opportunities for businesses by increasing their efficiency using outside companies’ help to produce in-house products or goods. Outsourcing presents a significant stage of cooperation in international businesses and helps them to achieve competitiveness through optimization of production costs. This essay will explore different approaches to outsourcing, on the example of the hypothetical company Global Core Engines specializes in manufacturing engine parts for vehicles.
Outsourcing at Global Core Engines
Global Core Engines’ supply chain includes raw material distributors, the company’s transportation trucks, several warehouses, and retail shops. The business undergoes a stage where a lack of additional income limits its development, and the company’s competitors started selling products of the same quality at a lower price. The leadership suggested using outsourcing to optimize the expenses but experienced trouble defining which activity area suits the best for outsourcing.
Firstly, the primary area from which the organization can significantly benefit is outsourcing the production of a portion of the company’s product range. While the company got a significant amount of its’ good reputation among consumers for high-quality engine parts, some products in the company’s range are much more popular than others. Thus, outsourcing the manufacturing of less popular details can reduce the company’s production costs without damaging the company’s image as a quality manufacturer.
Furthermore, the company uses several company-owned trucks to transport finished products between the factory, warehouse, and retail shops. Thus, the company’s additional expenses include trucks’ maintenance, fuel consumption, and drivers’ salary. Reducing the number of drivers to a minimum and outsourcing transportation services will result in more financial resources to develop new projects. In addition, the projects for the development of new products with more competitive advantages can also be outsourced to organizations specialized in project management.
Lastly, the company can significantly benefit from outsourcing sales channel management. One of the important ways to boost sales for products is increasing audience coverage. Thus, most of Global Core Engines’ product sales are performed through the company’s retail shops. Outsourcing sales channel management can grow the company’s audience and positively influence sales. Furthermore, it can help the organization gain more valuable connections in the industry or related areas.
Several steps can to persuade the company’s stakeholders and immediate community into outsourcing. First, the leaderships need to be informed about the positive influence of outsourcing by becoming familiar with important cases in which outsourcing increased the level of competitiveness for businesses. For example, Nike has no manufacturing plants, but its effective use of outsourcing provides a significant competitive advantage in increased revenues (Gallimore, 2021). Furthermore, conducting a detailed financial analysis of the company’s non-optimized production costs can provide a substantial foundation for the decision to resort to outsourcing.
Lastly, the company’s decision to use help from outsourced manufacturers can cause discontent in the immediate community. Therefore, it is necessary to convey to employees that closing a part of job positions in production is sourced in the company’s decision to optimize the production costs. Thus, the decision will not negatively affect the local community as instead of old jobs in manufacturing and transportation, the company will open new positions in production quality control and sales departments.
In conclusion, this essay analyzed how different approaches to outsourcing can be applied in one company. The essay explained how outsourcing contributes to revenue increase which presents an important component for a company’s development and competitive advantage. The essay also suggested what information the managers should present to the company’s stakeholders to convey the idea about the potential positive influence of outsourcing on business and the immediate community.
Gallimore, D. (2021). Nike’s Approach to Outsourcing. Outsource Accelerator. Web.