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Week 4 - Internal/External Sourcing
ISCOM 370 - Strategic Supply Chain Management
April 12, 2010
Internal/External Sourcing Strategies
Outsourcing customer service has become a more common approach for most companies for many reasons with the most important being cost savings. Outsourcing with a sole focus on the cost of goods has been a short sighted approach as there are many under budgeted, unseen costs associated with customer dissatisfaction and loss of product quality. The success of outsourcing strategies have revealed four value added areas that can contribute to a company's competitive advantage, employees, suppliers, and customers.
Last year the United States companies spent about $29 billion on outsourcing activity or products (Thomas, 2009). There is no question that outsourcing has become a huge driver for an organization's business strategy. From buying raw materials from other countries to having the most complex variation of off-shoring services, outsourcing is a big part of all organizations' business strategies.
Outsourcing strategies are not always successful so it is important to understand all the factors that may influence the company's outsourcing strategy. The basis of outsourcing is the similar to the trade theory in which two or more parties can benefit from the exchange of goods and or services. Cost savings is one major reason why outsourcing and trade are beneficial to a company.
There are three major functions within a business; core functions, tactical non-core functions, and strategic non-core functions. The core functions are those that determine what the comparative advantage will be for the organization and the specialized tasks that will make the business unique and yet successful. The tactical non-core functions are considered to be n necessary components of the organization that are usually outsourced, but they do not have a direct...