4.1.1 Outsourcing

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Outsourcing is the process of a business delegating business tasks to another company. For example, Apple outsources production of the iPhone to Foxconn or a small business may hire a marketing firm to market their business for them.

There are different reasons for outsourcing:

  • Speed — the business may not have the time resources available to conduct the business activities, it is often quicker to outsource and get another company that specialises to do the task.
  • Cost — it may be too expensive to conduct the business activity in house, for example, lots of businesses outsource human resources (staff management) to other companies, reducing business costs from creating a new department for that task.
  • Quality — Quality can be a reason for outsourcing. Sometimes the business lacks the skills and expertise to complete the business tasks. For example, Apple Outsource the production of iPhone to Foxconn, and some of their displays to Samsung because the business lacks the experience, resources and factories to do the task.
  • Flexibility — The job may require specilist equipment to compelte which could incur a start-up cost. If it is a one off or occasional job it may be beneficial to outsource as and when is needed without commiting business resources specifically for the Job. Additionally, the business may lack staff or experience to complete a task.

Outsourcing is usually expensive, but by using firms that specialise in a certain area, the work is usually better quality than if the firm completes the work internally.

Outsourcing means the business benefits from not having to hire the staff to do a job, an example of this is security guards in nightclubs, security is often ‘outsourced’ to specialist security firms.

1.4 Stakeholder Engagement

4.1.2 Lean production