The document discusses outsourcing, including what it is, why companies do it, and some risks and myths involved. Specifically, it defines outsourcing as contracting business processes to an outside provider, discusses common reasons for outsourcing like reducing costs and focusing on core competencies, and outlines potential risks such as pricing issues, supplier non-performance, and lack of goal alignment between companies and suppliers.

1. Outsourcing in General.

2. Contents 1 What is Outsourcing? 2 Spectrum of Outsourcing 3 Why Company Outsource? 4 Outsourcing Risks 5 Outsourcing Process 6 Drafting an outsourcing contract 7 Concerns of Outsourcing in SCM 8 Myths of Outsourcing in SCM

3. What is Outsourcing? Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. Outsourcing is defined as the contracting of one or more of a company’s business processes to an outside service provider to help increase shareholder value, by primarily reducing operating cost and focusing on core competencies.

4. The entire spectrum of sourcing Outsourcing, To obtain components for products or services from sources outside the organization. In-sourcing, Transfer tasks that were performed outside the organization into the organization Offshoring, Outsourcing overseas or in a separate country Near-shoring, Outsourcing to cheaper overseas, still geographically closer locations , e.g. Canada and Mexico Rural-sourcing Outsourcing to cheaper rural areas in the United States Volunteers Least expensive but sometimes most difficult to manage

5. Why do companies outsource? Reduces administrative burdens Focus on strategic areas Reduce costs Focus on core functions Acquire new skills Acquire better management Assist a fast growth situation Avoid labour problems Focus on strategy Avoid major investments

6. Why do company outsource? Handle overflow situation Improve flexibility Improve ratios Jump on to bandwagon Enhance credibility Maintain old functions Improve performance Begin a strategic initiative

7. Why do companies outsource? 10% 30% 60% Without Outsourcing Strategic Tactical Admin Admin Tactical Strategic With Outsourcing

8. Outsourcing Risks Short term : pricing issues operational issues at supplier’s end Long term : non-performance by a supplier nonalignment of company’s goals with supplier’s goals

9. Outsourcing Process Understanding company goals and objectives A strategic vision and plan Selecting the right vendor Management of the relationships

10. Outsourcing Process 5. A properly structured contract 6. Open communication 7. Senior executive support 8. Use of outside expertise

11. Drafting an Outsourcing contract Why and what to be outsourced?? Clear business objectives Internal and external benchmarking Develop performance and cost targets

12. Drafting an Outsourcing contract Develop initiative-based targets Fulfillment of initiatives beneficiary for both parties Review performance regularly Expand or shrink the relationship

13. Concerns about Outsourcing in SCM Fear of losing control Lack of confidence Lack of outsourcing education Management philosophy and tradition

14. Myths of Supply Chain Outsourcing My Outsourced partners are all supply chain experts Partners have state-of-the-art IT infrastructure By outsourcing production and fulfillment, no need to worry about execution Outsourced partners will provide expert project management

15. Myths of Supply Chain Outsourcing Outsourcing automatically gives a time-to-market advantage Fulfillment is easier to outsource than manufacturing

16. Thank You !