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'Changing economic conditions may have undermined some of the benefits of offshoring. For managers of global supply chains, this could be the time to re-evaluate…'
'Analysts generally agree that U.S. companies — and many of their counterparts in Europe and other developed economies — tend to think a little harder nowadays about sending production lines to Asia. Indeed, some companies were burned after outsourcing turned out to involve all sorts of hidden costs, including quality control problems and delays that resulted from longer supply chains. Recent headlines suggest these companies may be relocating some low-cost production lines back to “near-shore” locations…'
In your report you should address the following:
- Establish the general benefits sought from offshore sourcing (20%)
- What cost elements need to be considered to fully understand total landed costs and how might these be changing? (20%)
- Discuss the wider supply chain and risk management issues that derive from complex global networks. (20%)
- What are the benefits and challenges to multinational companies setting up operations in Indonesia? (20%)
Economics is the study of the different relationship of human with the ends, and scarce means having many alternative benefits(Deblonde, 2013). It is also defined as the study of scarcity in the market or the way an individual uses the resources and takes the decision on behalf of the organisation(Deblonde, 2013). Outsourcing some of the requirements of the business from a country other than the place of the source is termed as offshore outsourcing(Doh, 2005). Economics involves along with finance and stock market branch some of the wide range of topics such as wealth, finance, recessions, banking sector etc.
Below is a brief report on the different aspects of offshore outsourcing in the economics of the organisation with their benefits and elements affecting the same.
Benefits from offshore sourcing
Success in the business depends upon the ability of an organisation to sustain in the marketplace. Offshore outsourcing is the different ways in which the companies outsource their organisational needs(Management Association, 2012). Offshore outsourcing is the result of globalisation, competition in the market, various challenges in the economic environment etc. which have affected the performance of the business in the marketplace. For instance, in the case of IT outsourcing, the software companies have shifted their base to the areas of minimum wage returns.
Some of the advantages of offshore outsourcing are (Rolstadås, et al., 2012)–
- Offshore outsourcing helps the organisation to increase efficiency at work, develop quality systems and hence increased satisfaction of the customer.
- The enhanced technology assures the business with a continuous focus on innovation excellence, which invariably affects the revenue generation of the business.
- It reduces the costs of maintenance and implementation of different efficient systems such as the human resource department, IT department etc.
- Offshore outsourcing also reduces the manpower, which might be necessary if the organisation has to have the same systems inside them.
- It provides a technological advantage as the outsourcing combines skills and knowledge together to derive best practice methods.
- Offshore outsourcing helps the organisation to gain high-quality standards in their service as they usually abide by the key standards of the industry.
Hence many organisations such as Tata Consultancy, IBM, and Wipro etc. have reconstructed their business models to enhance their performance through offshore sourcing.
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