Part of the procurement process is to consider whether to outsource, offshore or insource goods or services to achieve the best value and expertise.
Outsourcing may be considered following a skills analysis for example a company may not have the necessary skills or technical expertise for a particular function or a project or the time to carry it out. This could be the production of a product, design of a website or a function such as accounts or for procurement a specific category of spend and by outsourcing this to experts may deliver more value quickly or a better output and reduce recruitment and operational costs of employing experts on a full time or part time basis as they can be employed on a contractor and on an ad-hoc basis for project-based work. Outsourcing certain tasks allows you to scale up or down relative to demand without the permanent overheads.
Offshoring is moving a business process and operating it out of a foreign location for example the manufacturing process where labour is cheaper or expertise higher. There are occasions where you can outsource an activity but you are sold an offshore solution where the work is done in a foreign country such as India, Eastern Europe, China, Vietnam, or Korea who have the infrastructure, technology and lower costs.
Insourcing establishes shared service centres within the organisation and groups together a function such as finance from different locations into one group which offers cost savings, standardised processes, streamlining of projects and reporting and efficiency benefits with resources being relocated to one location.
Presented earlier this year at the annual Supply Chain Seminar in Aberdeen, hosted jointly by Oil & Gas UK and CIPS.
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Globalisation is a reality ...You can sit around and wish that something else was taking place or you can take advantage of globalisation, what we call ‘insourcing’...
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Offshoring is an irreversible trend that is already expanding to include not just routine processes but also the core activities of Western service firms (Jagersma and van Gorp).
The purpose of the concept is to provide an insight into the benefits and drawbacks of outsourcing in procurement. It explores how organisations make outsourcing decisions and offers...
For more information and context around the models please refer to the Purchasing Models Handbook.