Why Companies Outsource?

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Questions and Answers

Match the outsourcing reason with its description:

Capacity Management = Need to acquire temporary capacity based on fluctuating demand Lower Cost = Replacing expensive local resources with cheaper external resources Better Performance = Using specialized providers for higher quality and innovation Fast and Continuous Service Delivery = Achieving greater output by working around the clock

Match the outsourcing activity with its type:

Automobile components = Part-based activity Cruise-ship rooms = Part-based activity Airplane avionics = Part-based activity Desktop build and configuration = Part-based activity

Match the outsourcing example with the correct provider:

Sales force providing web-based sales management = Better Performance PeopleSoft providing employee-facing tools = Better Performance Offshoring market research support to reverse time zones = Fast and Continuous Service Delivery Offshoring processing of bills of lading to other time-zones for faster task completion = Fast and Continuous Service Delivery

Match the outsourcing reason with its benefit:

Capacity Management = Acquiring temporary capacity based on fluctuating demand Lower Cost = Replacing expensive local resources with cheaper external resources Better Performance = Using specialized providers for higher quality and innovation Fast and Continuous Service Delivery = Achieving greater output by working around the clock Signup and view all the answers

Match the outsourcing reason with its specific situation:

Capacity Management = Need to hire more employees one day and fewer the next day due to demand fluctuations Lower Cost = Taking advantage of tax differentials or government incentives in other locations for cost savings Better Performance = Utilizing external providers for better quality and innovation in service delivery Fast and Continuous Service Delivery = Completing tasks faster by offshoring work to different time zones Signup and view all the answers

Match the outsourcing reason with its impact:

Capacity Management = Managing temporary capacity based on varying demand requirements Lower Cost = Reducing expenses by using external resources instead of expensive local ones Better Performance = Achieving higher service quality and innovation through specialized providers Fast and Continuous Service Delivery = Improving speed and efficiency of service delivery through continuous operations Signup and view all the answers

What is one of the main reasons why companies outsource according to the text?

To increase in-house capacity (C) Signup and view all the answers

How does outsourcing help in lowering costs, as per the text?

By replacing expensive local resources with cheaper external service providers (D) Signup and view all the answers

What is a benefit of outsourcing related to better performance, as mentioned in the text?

Employing specialized external providers for better quality and innovation (A) Signup and view all the answers

How does outsourcing contribute to faster and continuous service delivery according to the text?

Allowing work to be done around the clock by distributing tasks globally (C) Signup and view all the answers

Which of the following is an example of part-based activities suitable for outsourcing, based on the text?

Airplane avionics (D) Signup and view all the answers

How does outsourcing help companies in managing capacity, as stated in the text?

By acquiring temporary capacity to handle fluctuations in demand (C) Signup and view all the answers

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Study Notes

Reasons for Outsourcing

Companies often outsource to reduce operational costs by leveraging lower labor costs and economies of scale offered by external providers.
Outsourcing provides access to specialized expertise, enabling businesses to utilize the latest technologies and best practices without heavy investments in training or infrastructure.

Benefits of Outsourcing

Improved performance is a key benefit; outsourcing enables firms to focus on core competencies while expert providers handle other tasks efficiently.
Outsourcing allows for faster and continuous service delivery, as external providers often have streamlined processes and dedicated teams focused on specific tasks.

Types of Outsourcing

Activities suitable for outsourcing can be categorized into part-based activities, such as customer support or IT services, as these can be efficiently managed by external teams.
Process-based activities belong to another category, where outsourcing focuses on comprehensive functions like payroll or finance management to enhance operational efficiency.

Impact of Outsourcing

Companies can manage capacity effectively through outsourcing by adapting quickly to changes in demand, thus optimizing resource allocation and reducing overhead costs.

Specific Situations for Outsourcing

Outsourcing is particularly beneficial in scenarios where a company faces skill shortages or needs to scale up operations rapidly without the burden of hiring additional full-time employees.