COMMERCE 2OC3 Lecture Notes - Lecture 11: List Of Auto Parts, Country Risk, Service Management

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CHAPTER 11S – OUTSOURCING AS A SUPPLY CHAIN STRATEGY
SUPPLY CHAIN MANAGEMENT
The objective is to build a chain of suppliers that focuses on maximizing value to the ultimate
customer.
OUTSOURCING
Outsourcing can replace entire purchasing, information systems, marketing, finance, and
operations department
Applicable to firms throughout the world
Making the right decision may be the difference between success and failure
WHAT IS OUTCOUSRCING
Procuring from external suppliers service or products that are normally part of an
organization
Offshoring is moving processes to a foreign country but retaining control
Extension of the long-standing practice of subcontracting
Outsourcing has become a major strategy as firms move toward specialization
1. Increasing expertise
2. Reduced cost of reliable transportation
3. Rapid deployment of telecommunications and computers – the internet
EXAMPLES OF OUTSOURCING
Call centres for Brazil in Angola
Legal and finance service in the Philippines
IBM providing travel and payroll for P&G
ADP processing payroll for thousands of firms
Blue Cross sending patients to India
TYPES OF OUTSOURCING
COMMON PROCESSES OUTSOURCED ARE:
Purchasing Logistics R&D Operations Service management Human
resources Finance/accounting Customer relations
Sales/marketingTraining Legal processes
Outsourcing implies a legally binding contract
STRATEGIC PLANNING AND CORE COMPETENCIES
Strategic planning defines the mission and goals for the organization
From this the organization determines the role of each business activity
Core competencies are things the organization does better than its competition
Non-core activities are good candidates for outsourcing
THEORY OF COMPARATIVE ADVANTAGE
If an external outsourcing provider can perform activities more productively than the client firm,
the outsourcing provider should do the work
**This applies regardless of the geographical location!
OUTSOURCING TRENDS AND POLITICAL REPERCUSSIONS
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Document Summary

Chapter 11s outsourcing as a supply chain strategy. The objective is to build a chain of suppliers that focuses on maximizing value to the ultimate customer. Outsourcing can replace entire purchasing, information systems, marketing, finance, and operations department. Making the right decision may be the difference between success and failure. Procuring from external suppliers service or products that are normally part of an organization. Offshoring is moving processes to a foreign country but retaining control. Extension of the long-standing practice of subcontracting. Outsourcing has become a major strategy as firms move toward specialization. Increasing expertise: reduced cost of reliable transportation, rapid deployment of telecommunications and computers the internet. Legal and finance service in the philippines. Ibm providing travel and payroll for p&g. Adp processing payroll for thousands of firms. Strategic planning defines the mission and goals for the organization. From this the organization determines the role of each business activity.

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