The Risk And Benefits Of Outsourcing Supply Chain And Risk Management Essay

Today’s global supply chain has been shaped by the past decades of focus and strategies based on achieving the lowest operational costs coupled with a push towards market expansion and supplier outsourcing. The expansion of global supply chains combined with the increasing number of joined connections to external business partners has significantly raised the possibility for supply chain disruptions (Poirier, Quinn, & Swink, 2010). In today’s global business environment, the importance of risk management continues to grow daily.

Outsourcing is a severely underestimated threat to the United States’ economy, which may eventually lead to our next financial crisis. Damages from outsourcing span throughout all levels of the US economy, although the effects of outsourcing are especially devastating to those of the lower class. The threats presented by outsourcing are acknowledged by both of the major presidential candidates: Hillary Clinton and Donald Trump. In order to prevent the next financial crisis, we must take immediate action.

By the 1990’s, the scope of the services being outsourced widened to include any service. In the Semiconductor Industry, the actual fabrication of devices moved overseas to countries such as Taiwan. This shift gave more control to the external company and these service suppliers became closer to their business partners, becoming part of the supply chain for the primary company. The use of outsourcing by companies is progressing to where the external company is actually bringing the product to market, including engineering and management services. The outsourcing company is only developing the innovation. In this case the primary company’s business is completely dependent on the external company.

Risk and Consequence: Tales from the Industry Supply Chain Risk Categories Disruptive Events, Uncertainty and Impact Models and Methods for Supply Chain Risk Management Example of Risk Management for IBM’s Product Supply Chains An Approach for Measuring the Impact of Identified Supply Chain Risks Key Lessons from IBM’s Supply Chain Risk Management Approach The Landscape: Supply Chain Risk Management Supply Chain Risk Management: Getting Started In Summary Authors Footnotes

Industrial shifting, development of knowledge and cost of employee in different parts of the world led different countries to outsource different products and services from other countries. Concept of outsourcing is not very old. It was started at the very end of twentieth century with the development of computer and information technology. Now most of the companies and almost every country outsource something from other company or country. So, it has become a widely used term all over the world. Therefore, the purpose of this study is to find out the most common areas where outsourcing is mostly used. The study has also

Outsourcing IT services causes organizational risks that services recipients must have pay serious attention to. About a decade ago, very few companies had any experience with the contracting process. Much experienced has been gained outsourcing non-core process such as catering, security, logistics and treasury and archive services. in fact, many companies now have experienced with IT outsourcing itself, since they have contracted out their IT services before sometimes even to several consecutive suppliers.

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 .

Customers are becoming more cost-conscious and this is resulting in changes in our supply chain process in order to reduce production costs and remain competitive in our market. Outsourcing has become a necessary measure in order to cut costs and increase competitive advantage. Outsourcing certain aspects of the supply chain, while having both advantages and disadvantages, can be very beneficial to the company. When analyzing whether outsourcing will be good for the company, one must look at the advantages and disadvantages of outsourcing, how it will decrease costs and increase competitive advantage, and what changes will take place with a newly developed global workforce.

Development of specific skills: Out sourcing benefits the development of specific skills at a corporation level the same way off shoring does at a global level. Companies outsource in order to take advantage of specialized skills and knowledge that itself does not own or that can’t be efficiently acquired. In this case out sourcing leads to higher efficiency and better quality provided by third parties for a specific business processes. Moreover the third parties can further specialize to take advantage of the resulting economies of scale and mitigate the possible shortage of specific skilled and talented workers.

Supply-chain management is an important consideration of Operations Management. In the past, many businesses only focused on the operations occurring within. Even today, business push to increase standards of performance and quality, create better marketing strategies, improve efficiency in the workplace, and hire and train employees as part of human resource strategy, among other ‘inside’ actions. However, it is a growing reality that there are other ‘outside’ factors and stakeholders in the final product/service: it is a cumulative effort. As a result, these factors should be considered as an integral part of Operations Management Strategy.

“The finest supply chains aren’t just swift and cost effective, they are also agile and flexible and they ensure that all their companies interests stay aligned.”- Hall L Lee

Off-shoring is not a concept and practice that should be left to backroom accountants or high-priced consultants with promises of quick profits and spreadsheets. This is mainly because it generates mission-critical concerns with the potential of affecting the survival of the entire company, whole industries, and eventually the economy. In the past few years, several American companies have been involved in off-shoring and outsourcing some of their operations, especially manufacturing operations. For example, Boeing outsourced the manufacturing of 787 Project worth billions of dollars. This project was characterized with several problems that contributed to the postponement of its delivery schedule at least seven

Supply chain risk comes from what you do not understand and underestimate. When you have foresight of what could happen you are able to develop plans to mitigate the effects. What Simchi-Levi, Schmidt and Wei have outlined is a way to have improved foresight. What they have stated is that most supply chains presume that the greatest risk is from whom they spend the most money. The mathematical model that they have developed indicates that this is not always true.

The supply chain management basically involves processes and activities which are involved in the planning, organising, controlling and implementing the cost effective flow of goods from the point of origin to the point of consumption. The whole process will have different players like the supplier, manufacturer, distributor, retailers and the customers themselves as the end point of consumption. The supply chain has changed drastically over the years. This days they are very global in nature. Involving various complex interactions and flow of goods, data and funds between companies which are situated in different countries and continents. Even though the companies are spread across the world the manufacturing plants generally follow a similar structure which normally comprises of the suppliers, manufacturing plants, distributors, retailers, inbound and outbound logistics providers. There were a lot of challenges which arose because of the competition which made the companies to rethink their strategies in order to get the product to the right place at the right time at the lowest cost possible. The companies should always look at improving the whole supply chain and every player in the chain should coordinate with one another if they want to increase the efficiency. The organisation should realise the strategic importance of supply chain as it is a key to building a sustainable competitive edge. (Li, Ragu-Nathan, Ragu-Nathan, & Rao, 2006).

The Supply Chain required the cooperation of all the company 's internal departments with external parties, for example, the supplier to get a product that meets market needs in a timely manner. And that there is integration of all parties in terms of the information involved at the right time to get the right product for the right quantities in the right place at the right time for the client to meet the requirement of the