Outsourcing / Offshoring and Insourcing

Part of the procurement process is to consider whether to outsource, offshore or insource goods or services to achieve the best value and expertise.

Outsourcing may be considered following a skills analysis for example a company may not have the necessary skills or technical expertise for a particular function or a project or the time to carry it out. This could be the production of a product, design of a website or a function such as accounts or for procurement a specific category of spend and by outsourcing this to experts may deliver more value quickly or a better output and reduce recruitment and operational costs of employing experts on a full time or part time basis as they can be employed on a contractor and on an ad-hoc basis for project-based work. Outsourcing certain tasks allows you to scale up or down relative to demand without the permanent overheads.

Offshoring is moving a business process and operating it out of a foreign location for example the manufacturing process where labour is cheaper or expertise higher. There are occasions where you can outsource an activity but you are sold an offshore solution where the work is done in a foreign country such as India, Eastern Europe, China, Vietnam, or Korea who have the infrastructure, technology and lower costs.

Insourcing establishes shared service centres within the organisation and groups together a function such as finance from different locations into one group which offers cost savings, standardised processes, streamlining of projects and reporting and efficiency benefits with resources being relocated to one location.

Understanding outsourcing

CPD 2This module introduces you to the concept of outsourcing, the implications of the ‘make or buy’ decision and how to develop a successful outsourcing process.

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