Out sourcing

Sourcing is another decision that is added to the supply chain.  This variable needs to include numerous discussions in order to determine which type of sourcing is best for the company: outsource, internal source, captive offshoring or offshore outsourcing.  Below is a table that describes each of these sourcing options:

Work conducted in foreign markets	Captive offshoring	Offshore outsourcing
Work conducted in domestic markets	Internal sourcing	Outsourcing
	Work conducted within company	Work conducted by outside supplier

Table 1: Source: https://cb.hbsp.harvard.edu/cbmp/content/28911835

In the article 10 Fascinating Facts About the Hidden Industry that Touches 90% of What You Own, it states “it is cheaper for Scotland to send its cod 10000 miles over to China to be filleted and returned to Scotland” [instead of filleting their own fish].   We can tell that Scotland either outsources or captive offshores this process. At first, it seems like it would be more efficient to keep the fish in Scotland and find someone to fillet them there, but the fact is shipping is dirt cheap and labor laws are different in each country throughout the world.  That company can then save hundreds of thousands of dollars by moving the fillet process to another country.  Some argue that outsourcing is terrible as countries lose jobs within their own homeland.  Others fire back saying that companies are saving money by outsourcing and can spend the same money on hiring other employees, providing internships, or even scholarships in their homelands.(Hargreaves, 2012).  Theoretically, this would be the ideal case if a company were to outsource, but many companies do not use the saved money to hire new employees or to increase scholarship opportunities.

Of course, there are other areas that need to be considered besides cost when a company decides where and with who to outsource.  Now, ability to innovate, skill set, and security are also topics of concerns.  (Sperline, 2008).  Think about how much the environment changes year to year. It sure appears the amount of natural disasters are increasing and seasons are more variable each year. This must play an effect when a firm is deciding the length of a contract with its suppliers.

I end this blog with a few questions to consider.  With the increase in technology and natural disasters, can firms accurately predict which products will be bettered outsource verses in-house?  Will firms be able to bounce back if a natural disaster hits their plant?

References

Hargreaves, S. (2012, September 14). CNN. Retrieved from The case for outsourcing jobs: http://money.cnn.com/2012/09/14/news/economy/outsourcing-jobs/

Sperline, E. (2008, September 15). Forbes. Retrieved from It's Not Jst About Cheap Labor.