The Sourcing Decision: Location of Function

Outsourcing- purchasing from someone else a product or service that had been previously provided internally

  • Avoid outsourcing distinctive competencies

Offshoring the outsourcing of an activity or a function to a wholly-owned company or an independent provider in another country

Disadvantages of outsourcing and offshoring

  • Customer complaints
  • Long-term contracts
  • Ability to learn new skills and develop new core competencies
  • Lack of cost savings
  • Poor product quality
  • Increased transportation costsErrors in Outsourcing Efforts
    • Outsourcing the wrong activities
    • Selecting the wrong vendor
    • Poor contracts
    • Personnel issues
    • Lack of control
    • Hidden costs
    • Lack of an exit strategy
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