Reduced Cost from Outsourcing

Outsourced almost 87% of production activities involving spare parts while maintaining core competencies like R&D, design, quality control and key trademark

to be completed by countries who pay their employees as little as 10% of the average earnings in America. Although this is happening in many professions, it is extremely noticeable in engineering with the managers of these large companies hoping to save a net cost of 70 percent (Ron Hira). This strategy, which is commonly known as offshoring, has been increasing in popularity exponentially and there have been many debates as to whether this method of production is a benefit, or a burden. It is uncertain what the overall effect of offshoring will have on the American economy but the workers, namely engineers, should begin adapting.

Outsourcing is a method used by many corporations in which their products are manufactured in foreign countries often for cheaper labor.This method method of productions has it’s pros and cons.

Over the last decade, outsourcing has become a popular political debate topic in the United States. Outsourcing, typically used by firms as a way to lower costs, is the process of assigning work to an outside agency. Despite statements that outsourcing saves a significant amount of money for U.S. companies, not only does outsourcing have consequences both on the U.S. as well as on the other countries involved, but also more recent studies show that the amount of money saved for companies has decreased significantly.

Because of increased economic competition and market pressures it is clear as to why American companies are offshoring. Even though there are financial benefits for companies to offshore there are many reasons not to for the sake of American jobs. Having an education and living in a country where standards of living are high, we as workers shouldn’t be punished and replaced with overseas workers who are willing to work for less. Economist claim that offshoring has provided a “ripple effect” in our economy which has resulted in lower inflation, increased productivity and lower interest rates, but evidence of increasing unemployment rates states otherwise. Offshoring has yet to encourage job creation and have a lasting positive effect on the economy as a

As time passes by, outsourcing has started to develop in all significant economies of the world. When we begin discussing the upsides and downsides that are connected with this process, its critical to comprehend the progress of this case that will help us break down the methodology from numerous points of view. The procedure of outsourcing is characterized by utilizing the ability and probabilities of an outsider in an assention premise. So hopefully you know, It was throughout the 1980s that the methodology began and it was predominantly because of the endeavors of transnational organizations when they started to contract work compel crosswise over national limits. Despite the fact that the methodology of outsourcing has figured out how to turn out from its begining stages, there's still various customs that have a place with the whole process that have created approaching consequences for the improvement of the US economy.

Among the list of controversial issues relating to jobs and the economy in the United States, outsourcing is right up there near the top. Politicians frequently attack each other using the phrase, "sending our jobs overseas…" and many a politician has been stung by this accusation. Thesis: While there are clearly benefits to be realized by companies that engage in outsourcing, there are also difficulties, drawbacks, and unanticipated expenses associated with outsourcing. Outsourcer, beware, should be the motto going into to any outsourcing arrangement.

In today’s global business competitive environment, business organizations must innovate and adapt new strategies to sustain revenue generation, value while remaining competitive. Organizations have embraced outsourcing principles and adopted them to help in expanding to new markets. Outsourcing has enabled US multinational corporations to reduce costs and compete effectively in the global market. While the proliferation of outsourcing has been beneficial to short term growth by taking advantages of; low wages, taxes and investment incentives in developing countries, it will significantly dissolve the competitive advantages the United States enjoys. The outsourcing approach changes the historical model of economies of scale, the resulting intangible and hidden trade costs of outsourcing shall have a heavy bearing on the US economy. The competitive advantage of high technology, support for startups will be gradually eroded, enabling developing countries to compete directly with the United States.

Outsourcing services in companies happen fairly often. However, outsourcing services have its advantages and disadvantages. This includes outsourcing customer service. Some benefits of outsourcing customer service is that it saves money by not training new employees, frees management to focus on other aspects of the company, and by using overseas to save money and have more diversity. However, disadvantage may include employees who are not trained efficiently, language difficulties which may make it harder to understand the caller, poor connection when communicating with overseas professional, and lack of security of data when not being able to control security overseas (LiveHelpNow, 2010).

There are a multitude of strategic dimensions associated with sourcing and shoring techniques in the marketplace, conducting business abroad, and conducting business on the home front, or near the home place. These strategic dimensions include (a) domestic outsourcing (b) insourcing (c) backsourcing (d) offshoring (e) offshore outsourcing (f) onshoring (g) nearshoring (h) strategic outsourcing (i) business process outsourcing (BPO) and (j) offshore service providers (OSPs). These sourcing and shoring techniques can be complicated to understand. Domestic outsourcing is when a company decides to let go of an in-house job to go to another domestic company to perform (Koku, 2009). Insourcing is bringing back work internally that was previously outsourced (Nodoushani & McKnight, 2012). Backsourcing is rescinding the product or service back to the home country where it came from originally. Offshoring is when a company from one country outsources work to businesses in another country by either conducting operations in the foreign country, or subcontracting this work out through outsource providers who then transfer this work overseas (Chadee & Ramen, 2009; Koku, 2009).

Domestic/international sourcing. Several motivations (e.g. cost reduction, flexibility, access to new technologies and skills, focus on core activities) are encouraging them to outsource and/or localize their (IT or business) processes in foreign countries .These choices determine also relevant risks, such as loss of control, poor service quality, vendor dependency, cost escalation, and security criticalities .

The requirements of the business environment have determined most companies to focus on reducing their production costs in order to create competitive advantage by reducing the prices of their products and services. Some of these companies have decided to outsource some of their processes to developing countries in Asia, Africa, and Europe. The cheaper skilled workforce in these countries allows companies to reduce production costs.

For years now it has been widely practised for large companies and firms to outsource manufacturing, services, and innovation activities to low-cost countries like China and India. However, while it may have always existed, it has only been in recent years that is has really started to take off. As discussed by Dossani and Kenney (2007, p.779), “in less than six years, offshoring of services has evolved from an exotic and risky strategy to a routine business decision.” The extent of this growth is having a huge effect on both emerging economies and advanced economies. According to Apte (2006), new product development is now the fastest growing offshoring segment in India. Advanced economies now have the ability to produce products at a far more productive and efficient rate than ever before. This also means that emerging economies can expand their own economies by having more people employed and paid. Unfortunately, many firms still have not taken advantage of this, and as discussed by Waltz (2005) it’s the stability and quality of work that is often what discourages firms.

This study will deliberate and explore the various theories and theoretical framework of determinant influencing offshore outscoring decisions which will assist the further researcher to create and design their ideas as well as to build new theories clarifying new perceptions of offshore outsourcing.

It is an evident fact that outsourcing is quite prevalent practice among both public and private organizations. It has been considered as one of the prime elements of any business strategy. It is with the aid of outsourcing that organizations attempt to reduce the overall cost of sustenance and augment organizational productivity in comprehensive terms. The activity of outsourcing enables the organization to render higher level of emphasis on core activities of business. In the past thirty years, various researchers have undertaken researches to support outsourcing as a mechanism for bringing down organizational costs in a substantial manner. But the comprehensive impact of outsourcing remains to be seen. This research work will assess the relevance and significance of outsourcing in reference to the process of new product development.