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What Are the Best Tips for Strategic Outsourcing?

Article Details
  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 29 June 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
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Strategic outsourcing refers to a process that a business concern undertakes to enter a contract with another business concern for the manufacture or production of a specified part of its product or a complete line of products on behalf of the contracting company. This type of business move is referred to as strategic outsourcing because the process may indeed be utilized by a business as a form of competitive advantage in the sense that it may use such a move to contract out those areas of its operations in which it is least capable, while focusing on those that lie at the core of its competency. The best tips for strategic outsourcing include checking the background of the company to which the business is trying to outsource production, ensuring that it outsources only those products that it lacks the capability to efficiently produce, and making sure that the strategic outsourcing process really does offer it some form of benefit.

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One of the considerations that a company must implement when it decides to engage in strategic outsourcing is to ensure that it picks the company to outsource the production with the utmost care. The reason for this lies in the fact that in this type of a situation, a company is really only as good as the company producing goods or products on its behalf through the assumption of a vicarious relationship between the two companies. As such, if the company producing a product for another fails to take the utmost care during the production process, any substandard item produced will reflect poorly on the contracting company. For example, if a computer company in the United States contracts the services of a company in China to produce the various components of the various computer models on its behalf, any negligence on their part that leads to malfunctions in the finished product will have serious effects on the company in the United States.

Another tip for strategic outsourcing is for the originating company to carefully analyze its operations with the aim of finding out those areas that are outside its core competencies, or the areas in which it expends a lot of effort in order to achieve a relatively minimal gain. For instance, the computer company could decide to outsource the production of the hardware to the companies located in Asia due to the fact that they can benefit from cheaper labor. At the same time, the company could decide to retain the majority of the technical aspects of the manufacturing process due to the perception that it has a specialization advantage in that area.

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