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Difference Between Outsourcing And Offshoring

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Outsourcing and Offshoring
Outsourcing is the act of contracting a form of work from one business to another third party. The concept and practice of outsourcing has been around for a very long time. Outsourcing can include both domestic and foreign contracts, and has become more common due to the rise of the global economy. However, due to the purpose of outsourcing being the potential of saving on costs, and specifically saving production costs, the modern day trends have come to follow global outsourcing, specifically for low-labor-costs nations (Vonderembse & White, 2013). Outsourcing can also involve offshoring. Offshoring is the process in which companies choose to relocate part of their business or some of their business processes …show more content…

In business, these calculations would be performed as mathematical equations. Therefore, to improve productivity, a company wants to increase the monetary value of the output and reduce the monetary costs of the input. In this equation is fundamental reasoning for outsourcing. If a company can outsource a product, thus lowering production costs, then productivity has improved. However, there will be trade-offs to consider.
An outsourced process, especially a production process, will incur added costs. There may be a need to pay more for transportation and delivery, as well as potentially paying more for raw materials. However, the trade-off idea is that these additional costs will be less than the savings produced by outsourcing the specific …show more content…

As previously addressed, the primary reason and advantage to outsourcing is to save costs, through increasing the value of output, decreasing the cost of input, and thus increasing productivity. However, the reasons to outsource does not stop here. There are also other advantages. Global outsourcing can provide specialty product lines that are exclusive to a country or region. Companies could choose to outsource production or, in the case of retailers, suppliers of country or region specific products could be outsourced. According to Vonderembse & White (2013), there could also be proprietary technology available that a company could choose to outsource, thus giving them an edge on their

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