ZBUS8303 Strategic Procurement And Outsourcing

The Risks and Benefits of the Outsourcing Approach

Benefits of outsourcing include expertise and swiftness since the vendors are specialized in their field. In addition, outsourced vendors have technical expertise and the best specific equipment better than the ones at the organization which is outsourcing. Outsourcing also enables an organization to concentrate on the core business processes instead of investing time in the supporting processes (Gewald & Dibbern, 2009). Furthermore, outsourcing results to risk-sharing whereby certain responsibilities and risks are shifted to the outsourced vendor. Another advantage of outsourcing is reduced recruitment and operational costs. However, there is the risk of the exposure of confidential company data if the company does not choose the right partner. Additionally, there is a risk of synchronizing the deliverables which are complicated. Outsourcing also has some hidden costs which may be a financial liability to the company. Moreover, there is a lack of customer focus where vendors may lack a complete focus on the tasks of the organization.

The Strategic Advantages of Outsourcing to Vertically Integrated Firms

The main advantage of outsourcing to vertically integrated firms is having control over the chain supply (Broedner, Kinkel & Lay, 2009). An organization can be in a position of joining ventures with their manufacturers or supplier and control its inputs and outputs including delivery, quality and costs. For example, the target is a good example of the vertically integrated firm. Despite the fact that the firm operates in the retailing business, they have acquired their own distributors and suppliers hence gaining a competitive advantage over their competitors and owning a good brand name at cheap prices. Other strategic advantages of outsourcing to strategically integrated firms include the company having a competitive advantage over non-integrated firms, boosted economies of scale, lowering of internal needs and high customer delivery.

References

Broedner, P., Kinkel, S., & Lay, G. (2009). Productivity effects of outsourcing: new evidence on the strategic importance of vertical integration decisions. International Journal of Operations & Production Management, 29(2), 127-150. https://doi.org/10.1108/01443570910932020

Gewald, H., & Dibbern, J. (2009). Risks and benefits of business process outsourcing: A study of transaction services in the German banking industry. Information & Management, 46(4), 249-257.