Hello,
I need four responses of at least 200 words each for the below students discussions for this week. Also in the bold below are the questions the students at answering.
Many companies around the world, including those in the US, have outsourced goods and services to India and China. However, some of these businesses have reversed course and are now insourcing these goods and services. Do you agree that this course reversal may be justified?
Position 1: Outsourcing VS
Position 2: Insourcing
Student one:
I understand that we are supposed to be picking sides this week, however I feel like I can justify each side of the argument. I do not think this is detrimental to my stance, and on the contrary I think it is an open-minded approach to the discussion. I believe this because businesses constantly need to be re-evaluating their current business model, and the value of outsourcing vs insourcing, among many other things.
I will say that I am more supportive of insourcing, as it helps to support our own economy. “Insourcing is the logical option if a company has the capacities available because it allows for full control.” (Gold, 2017) This particular article is focusing on a pharmaceutical company, however the same idea can be said for any large company in the United States. Additionally, keeping manufacturing in-house allows companies to remain independent from their suppliers and increases specialization, which in turn helps to decrease manufacturing costs. In supporting my argument of keeping jobs in our economy, “wage inflation in traditional outsourcing markets is putting pressure on outsource providers to find alternative delivery locations and to adjust their staffing mix in order to remain financially competitive.” (Sealock & Stacy, 2013)
Outsourcing, however, has its advantages as well. In the long run, and depending on the size of the company, outsourcing can actually help keep prices lower for the consumer. As noted by Sealock and Stacy, outsourcing can be the right approach for companies that “take the time to properly structure an agreement that drives cost reduction, takes advantage of outsource provider best practices, clearly defines scope and service levels that meet the company’s needs, and allows the company to focus on its core competencies.” (Sealock & Stacy, 2013) Additionally, medium-sized companies do not necessarily have the financial depth to allow them to be successful with insourcing, meaning they must focus their resources on a specific process, and not necessarily be able to do everything in-house. (Gold, 2017)
In the end, I think it is ultimately up to the company to decide what is best for them at any given point. What works today may not necessarily work tomorrow, and they need to be open-minded enough to understand that. “If possible, a combined strategy of both insourcing and outsourcing will most often provide the necessary flexibility and avoid any unsound dependence on third-parties.” (Gold, 2017)
Resource
Gold, O. (2017). Insourcing vs outsourcing: choosing the right strategy. Pharmaceutical Technology Europe, s4 – s5.
Sealock, A. & Stacy, C. (2013). Why some U.S. companies are giving up on outsourcing. Retrieved from www.forbes.com/sites/ciocentral/2013/01/16/why-som…
Student two:
I am a strong supporter of outsourcing. When talking about globalization, we would be advocating against the very term if we were to support insourcing. The goal of globalization is, after all, to spread our company’s reach to the other ends of the world. By choosing insourcing, we stay in our native country. While we may be providing some employment to our own United States citizens, we are missing out on numerous other things; lower wage expenses, an avenue into a foreign market, and providing livable wages to the citizens of that foreign country are just a few.
Nike Inc is a company that was founded in 1964 by Bill Bowerman and Phil Knight. Nike is a retail store that sells clothing, shoes, and many other sports equipment and gear. Nike has had their fair share of the bad spotlight in recent years. They have been accused of using child labor and paying wages that are substandard in the foreign countries where they own factories. “The share of production costs of Nike and Adidas shoes that ends up in a worker’s pocket is now a staggering 30 percent less than in the early 1990s (2.5 percent in 2017). (Guilbert, 2017). Nike has a large manufacturing industry in Indonesia, where they 80% of their employees are females and they pay at least $182 a month. According to a salary survey conducted in Indonesia in 2018, 98% of employees made less than $150 per month. With a 40-hour work week, that calculates to about $0.94 per hour. This seems extremely low for us Americans, but we have to remember that the cost of living in the U.S. is much higher than in Indonesia. By outsourcing, Nike is saving billions of dollars in their employees’ wage expenses and also providing employment to foreign citizens that may not have found work if Nike had not placed their large factories in Indonesia. Outsourcing seems like a win-win for both Nike and Indonesia in this case.
Guilbert, K. (2017). Adidas, Nike urged to ensure fair wages for Asian workers making World Cup kits. Reuters. Retrieved from https://www.reuters.com/article/us-asia-workers-wo…
Student three:
Both insourcing and outsourcing are a viable means of acquiring labor or specialty skills for a company and offer many benefits. Globalization, continuous fluctuation of consumer needs and other market forces often require businesses to re-evaluate their strategies and business models. Even after going the effort to find an outsourcing partner, to prepare complex contracts and agreements, fostering relationships, and overcoming cultural and language barriers, many companies are starting the return to insourcing. With all the issues that are coming from outsourcing, I feel that businesses switching to insourcing is justified.
The biggest difference between the two is the way tasked are performed with insourcing. Tasks are completed within the physical business. Furthermore, the business is able to have a more hands-on approach to managing the company’s processes. In some cases, insourcing can come with a higher cost, but the business still can save on benefits, hiring, and costs associated with permanent employees (Lazzari, 2019). Cost savings is the main reason a company chooses to outsource. If the anticipated cost reductions fall short, or if the expenses of outsourcing grow over time, the company will bring the outsourced activities back in-house. According to Parker and Lynch, insourcing is a great way to improve control, instill confidence in the employees, and generate collaborations across the departments. People generally think about cheaper products when it comes to spending on something. Cheaper may not always be better. Quality above price needs to be valued. Though outsourcing may be cheaper at the time, insourcing can get incredible rewards
To counter against outsourcing, public relations or political pressure issues can persuade a business to bring outsourced goods or services back in-house. “The current trade war between the USA and China, for example, is making life difficult for US companies that brokered deals with Chinese manufacturers to take advantage of low-cost labor†(O’Byrne, 2018). Nowadays, business information systems play a bigger part in the relationships between the company, customers, and suppliers. For example, the result of an outsourced component’s inability to align and integrate IT solutions could very well be the reason a business takes back any outsourced business activities. With outsourcing, response times to technical issues can be slower and the level of knowledge is often not as good as in-house employees.
General Motors (GM) is a great example of a company that changed majority of its outsourcing to insourcing. This company’s interest was to bring jobs back home to the United States. In 2012, GM took the initiative to transfer 90% of its information-technology based job back to in-house. This brought everything from data centers to software development into the fold and took away a lot of work from outsourced companies. The decision to do this is noteworthy since GM contributed to created jobs in America at a time when the nation was in economic recovery and had a high unemployment level (Chudzicka, 2013).
References
Chudzicka, J. (2013). Insourcing as a New Trend in Global Business. Foundations of Management, 5(2), 7–24. doi: 10.2478/fman-2014-0009
Lazzari, Z. (2019, August 8). The Difference Between Outsourcing & Insourcing. Retrieved from https://smallbusiness.chron.com/difference-between-outsourcing-insourcing-32400.html.
O’Byrne, R. (2018, August 15). What Makes Companies Bring Outsourced Operations Back In- House? Retrieved from https://www.logisticsbureau.com/8-reasons-companies-bring-outsourced-processes-back-in-house/.
Parker and Lynch. (n.d.). Outsourcing versus insourcing: Aligning your approach to your business. Retrieved from https://www.parkerlynch.com/clientservices/outsourcing-infographic/.
Student four:
Before I pick a side, I would like to state for the record that I find both outsourcing and insourcing beneficial in their own special ways. With that being said, outsource vs insource has been debated for quite some time. There is no perfect solution here as both methods come with the good and the bad. It’s just a matter of which one is the most convenient which is decided by upper management who base it on their own preferences. However, there are those who are new to this conversation, so it is important for one to understand what these methods mean as well as the ups and downs that come with them
Outsourcing is defined as the process of hiring outside help not associated with the business for the sole purpose of completing specific jobs. Companies use outsourcing in order to help focus on the bigger picture. Saving money is typically the main reason for choosing this method. Typically, travel, transport and media industries rely on outsourcing in order to complete important projects. Outsourcing isn’t all good as a lack of managerial control over the outside employees can result in poor customer service. For example, a company known for their kind and friendly customer service would not be able to enforce those same principles to the outside support center. This problem can be fixed by hiring outside help who speak the language better.
Pros- Cheaper, Higher chance of 24/7 availability in order to increase efficiency.
Cons- Potential for miscommunication due to language barrier, higher management cost, different time zones making it hard to manage the outside group effectively.
Insourcing is simply when a company makes use of their own resources and abilities using employees within their own business to accomplish goals. They keep their business close to the vest so to speak. Law firms are a good example of companies that use insourcing. In 2018, a legal survey showed that law firms conduct 75% of their business within their organizational structure, which is a dramatic increase from last years number. Just like outsourcing, insourcing runs into the problem of money as it is quite expensive creating new places of operations, especially if it involves the inclusion of new processes in order to create a new department.
Pros: Closer relationship with team members, Lower cost, Better communication, Convenient for traveling if you find the need to explain specifics in detail for better understanding.
Cons: More expensive compared to outsourcing, Lower levels of qualification, and difficulty of finding new talent on the fly.
Position
I feel that insourcing is the proper way to do business as it is important to work with a team that know each other better, have a better sense of what the their work culture is and to ensure proper customer service. Besides, you can’t put a price on quality performance.
References
Beers, B. (2019, September 19). Outsourcing vs Insourcing: What”s the Difference? Business Essentials. Retrieved from https://www.investopedia.com/ask/answers/032715/whats-difference-between-outsourcing-and-insourcing.asp
Shrivastava, S. (2019, May 22). Outsourcing vs Incsourcing IT: Pros and Cons Retrieved from https://www.tcognition.com/blog/outsourcing-vs-insourcing-it-pros-cons/
