The goal of all actions taken by an enterprise, regardless of its size or industry, is to achieve market success. Success is perceived as the result of a competitive advantage, which facilitates acquiring better clients and enables offensive and defensive actions against rivals.
Realizing the primary goal of an enterprise is not an easy task. When seeking the best solutions, managers want to answer a fundamental question: which services should be performed in-house (insourcing) and which should be obtained from external providers (outsourcing).
These decisions are also referred to as make-or-buy decisions. Each of the chosen options involves certain benefits and drawbacks. Therefore, the optimal solution seems to be investing in those factors that best contribute to achieving this advantage.
Insourcing – providing services in-house is particularly beneficial when a company carries out processes that give it a competitive advantage due to the unique and distinctive nature of those processes. It allows the company to control its entire operation. On the other hand, in cases where large capital expenditures and highly specialized know-how are required to carry out processes, and which could be available from external sources at a lower cost, insourcing contributes to reducing the company’s strategic flexibility.
Many companies realize that increasing flexibility is possible through the implementation of an outsourcing strategy. Outsourcing is defined as “an undertaking consisting of separating functions performed by the parent company from its organizational structure and transferring them to other business entities for execution”.
The general essence of logistics outsourcing stems from the conviction that the best results are achieved by focusing on core business, while other activities are entrusted to external companies specializing in a specific field. Implementing outsourcing enables access to state-of-the-art technologies, service processes, and the knowledge of service providers. On the other hand, outsourcing carries certain risks. The primary ones mentioned are the risk of improper service provider selection and problems related to the coordination of flows of goods, services, and information. When making an outsourcing decision, companies must also be aware that they may lose important (strategic) skills and technologies that are part of their competencies. Table 1 presents the advantages and disadvantages of insourcing and outsourcing. In recent years, companies, seeking new ways of managing and increasing efficiency, have turned their interest toward outsourcing. By utilizing outsourcing, they have developed a new form of interaction. This cooperation consists of the collaboration of companies that, while competing with each other, can simultaneously cooperate with companies providing logistics services. The basis of this cooperation is integration decisions within the supply chains created in this way. The chains contain the activities necessary for designing, manufacturing, and distributing products and services. Furthermore, there is a noticeable phenomenon of growing interest in integration through outsourcing. It has turned out that outsourcing ventures are of a restructuring and strategic nature. These actions, consisting of changing the organizational structure through “slimming down” the enterprise and building lasting partnerships, contribute to the realization of main strategic logistics goals. Currently, outsourcing is considered a universal management concept and a method for strategically shaping the structure of business operations. However, it is not a “silver bullet” for improving a company’s operations and its position in the currently functioning, highly competitive market.
The article comes from the magazine “Logistyka” 6/2008.
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These decisions are also referred to as make-or-buy decisions. Each of the chosen options involves certain benefits and drawbacks. Therefore, the optimal solution seems to be investing in those factors that best contribute to achieving this advantage.
Insourcing – providing services in-house is particularly beneficial when a company carries out processes that give it a competitive advantage due to the unique and distinctive nature of those processes. It allows the company to control its entire operation. On the other hand, in cases where large capital expenditures and highly specialized know-how are required to carry out processes, and which could be available from external sources at a lower cost, insourcing contributes to reducing the company’s strategic flexibility.
Many companies realize that increasing flexibility is possible through the implementation of an outsourcing strategy. Outsourcing is defined as “an undertaking consisting of separating functions performed by the parent company from its organizational structure and transferring them to other business entities for execution”.
The general essence of logistics outsourcing stems from the conviction that the best results are achieved by focusing on core business, while other activities are entrusted to external companies specializing in a specific field. Implementing outsourcing enables access to state-of-the-art technologies, service processes, and the knowledge of service providers. On the other hand, outsourcing carries certain risks. The primary ones mentioned are the risk of improper service provider selection and problems related to the coordination of flows of goods, services, and information. When making an outsourcing decision, companies must also be aware that they may lose important (strategic) skills and technologies that are part of their competencies. Table 1 presents the advantages and disadvantages of insourcing and outsourcing. In recent years, companies, seeking new ways of managing and increasing efficiency, have turned their interest toward outsourcing. By utilizing outsourcing, they have developed a new form of interaction. This cooperation consists of the collaboration of companies that, while competing with each other, can simultaneously cooperate with companies providing logistics services. The basis of this cooperation is integration decisions within the supply chains created in this way. The chains contain the activities necessary for designing, manufacturing, and distributing products and services. Furthermore, there is a noticeable phenomenon of growing interest in integration through outsourcing. It has turned out that outsourcing ventures are of a restructuring and strategic nature. These actions, consisting of changing the organizational structure through “slimming down” the enterprise and building lasting partnerships, contribute to the realization of main strategic logistics goals. Currently, outsourcing is considered a universal management concept and a method for strategically shaping the structure of business operations. However, it is not a “silver bullet” for improving a company’s operations and its position in the currently functioning, highly competitive market.
The article comes from the magazine “Logistyka” 6/2008.
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