Outsourcing review

Strategic Outsourcing.

Greaver, M. 1999. HD 39.5.G735 1999

We must earn more than the cost of capital.
www.greaver.com


Chapter 1
"recurring internal activites and decision rights to outside providers" (3).

Reasons to outsource(4).
1.Organizationally driven:
*increase product and service value, customer satisfaction, shareholder value
2. Improvement-driven reasons:
* "improve operating performance [higher qualitym increased productivity, shorter cycle times, higher utilization, increaeed outputs, greater profits.]
*acquire innovative ideas.
*improve credibility and image by association with superior providers @@@@
3. financially driven reasons
*reduce investment in assets to free up resources
4. Revenut-driven:
* gain market access through the provider's network
*accelerate expansion into the provider's capacity, processes,and systems.
5. Cost-driven reasons
*reduce costs through superior provider performance
* turn fixed costs into variable costs


Levels of outsourcing (5):
1.Individual
*moving positions out of the organization
2.Functional
* functional cost center basis-- modularizing a function for speicalized knowledge,etc.
3.Process
*how the product flows through the organization

*How does this outsourcing work? A: look at 'value chain' process chart [from Michael Porter's book "Competitive Advantage"]


What is strategic outsourcing? (8)
A: looks at relevance to company: vision of future, current and core competencies, structure, costs, performance, competitive advantages

50% Strategic (individual and functional's problem solving of stagnant processes)
47% Tactical (process long-term growth)
(View from the top-- Raise high the roof beam, " Chief executive, April 1997, p.67)

*Outsourcing is a stategic decision. This book provides appropriate strategic decision making methodology for outsourcing (10).



History

*Term coined in 1980s. Deals with internal activities.
(Internal activities are different from component part manufacturing.)

Functions outsourced:
payroll
pension admin
IT
telecom
document processing (mailroom, pms)
accounting
tax compliance
internal audit
inventory
facilities management
food service
janitorial services
management services (construction, hotels.)

"Outsourcing of entire processes has not been prevalent" (11).
But trends are growing in double digits.


Chapter 2: Methodology

1.Planning initiaives --> 2.exploring stategic implications --> 3.analyzing costs and performance --> 4.Selecting providers --> 5.negotiating terms --> 6.transitioning resources --> 7.managing relationships






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Supply chain imperative. 2004.
HD 39.5. N445 2004

Appendix:
Sustainable development commission's sector strategy self-assessment
www.sd-commission.gov.uk/pubs/sag/index.htm


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Outsourcing: implications for supply management
HD 35.5 .E388 1997
Ellram, Lisa et Maltz, Arnold. Advanced Purchasing studies.