Industry insight
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Week 5 framework
4. Outsourcing failure
In theory, outsourcing is expected to reduce costs, derive benefits from vendor’s capabilities and allow focus on core competencies. In practice, numerous studies have shown that a high proportion of outsourcing arrangements delivered results unacceptable to the client ( Doig et al., 2001 ; Robinson et al., 2008 ). Across studies, significant proportion of managers have reported instances of not having realized expected benefits or having reversed outsourcing decision ( Barthelemy, 2003 ; Bryce and Useem, 1998 ; Geary and Coffey-Lewis, 2002 ; Krell, 2006 ; Landis et al., 2005 ). Dissatisfactions range from costs not getting lowered but actually rising, to outsourcing contracts becoming ineffective in face of evolving market realities to the detriment of customer service ( Shi, 2007 ; Beaumont and Sohal, 2004 ). Clearly, outsourcing by itself does not result in improved performance unless backed by clear understanding and execution of the underlying strategies ( Gilley and Rasheed, 2000 ). Naive assumptions like “design should be kept in-house while manufacturing should be outsourced” have not been able to stand the empirical scrutiny. Even when a process is outsourced, often advantages can be maintained only by continuing to invest in related operational capabilities instead of depending solely on the supplier to manage the process ( Bengtsson and Dabhilkar, 2009 ). The numerous recalls that Ford Motors faced in late 1990s on account of outsourced parts and their subsequent admission that they had overstretched themselves in the outsourcing race by completely abandoning engineering capabilities in some critical parts is a case in point ( Murphy, 2003 ). What Ford subsequently did was to reclaim some engineering capability, not to reduce the involvement of suppliers in design but to be more involved in the process itself ( Murphy, 2003 ). Taken independently as a magic wand, devoid of various contingencies, outsourcing is no panacea ( Bengtsson and Dabhilkar, 2009 ; Gilley and Rasheed, 2000 ). It is this understanding that instead, effective management of the outsourcing arrangement by SO 7,3 232 the focal firm ( Gottfredson et al., 2005 ; Kakabadse and Kakabadse, 2005 ), taking into account various configurational possibilities ( Hoetker, 2005 ; Verwaal et al., 2008 ) will help realise its potential, that forms the motive for the following section. Download 329.89 Kb. Do'stlaringiz bilan baham: |
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