Advantages of Outsourcing - Essay Example

ERP’s measure of the cost of outsourcing services is crucial in painting a clear picture of the investment that the company ought to put into outsourcing endeavors. Moreover, the resultant impact of the outsourced services in regards to the output of the company is weighed against the investments (Matende & Ogao, 2013, p. 522). Put another way, costs versus benefits of the outsourcing venture can be effectively evaluated through adequate ERP measures and evaluations (Soltan, et al., 2015). DiGiTech, therefore, needs to employ ERP as a platform for measuring and evaluating its success factors in the business frontier. In essence, the use of ERP in gauging the impact of outsourcing on the business prospects of success will help the managers understand the true value that outsourcing brings to the firm (Slack, et al., 2014, p. 450). 

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Benefits of outsourcing

Among the advantages that outsourcing brings to the firm is the liberation of the company from obligations that would otherwise take up much time and energy when executing (Folinas, 2013, p. 41). As such, the company managers will find that they have more time at their disposal necessary for focusing on other important issues pertinent to the growth of the business. The company can have time to expand its focus to market segments that it has not already tapped into as well as paying more attention to employees within the organization towards enhancing the performance of employees (Hsiao, 2009, p. 55). Notably, freeing up most of its obligations to external contractors, the company adopts a leaner more efficient framework that makes the company competitive through an objective focus on the core business activities. For instance, the business can organize its staff to deal only in core business operations such as production and sales (Broedner, et al., 2009, p. 129). 

On the other hand, outsourcing can serve to facilitate other logistical functions such as transportation, bookkeeping, and inventory management. Consequently, DiGiTech can organize its human and financial resources in a manner that will assure it of sustainability and efficiency through a refocus on business core functions. With employees free from many responsibilities, the company staff can focus on core competencies towards a specialization approach to enhancing individual performance (DuarteI, et al., 2011). When employees are focussed, team effort that can be developed only serves to improve the outcomes of the input placed in the company’s workforce talents. More so, the important attribute in the development process of outsourcing is that it maximizes on company’s strengths while outsourcing various services where the company is not efficiently sufficient in providing (Isaksson & Lantz, 2015). 

DiGiTech can explore advantages that come with outsourcing and management of its operations through the application and implementation of the ERP program to effectively keep its costs of operations as low as possible. For instance, outsourcing clerical and human resource functions such as preparation and rollout of payroll have the implication of reducing the need for storage space needed for company files that are not directly linked to the production and sales process. Through outsourcing, such services, the office space that would otherwise be utilized for storage of files and also for use by clerical officers would be left to the development product development process. As such, the company can save millions of dollars in costs of maintaining storage space for data pertaining to logistical attributes of the supply chain and instead focus on production and sales of its merchandise. According to Folinas (2013, p. 41), a company that invests in outsourcing logistics will free itself from compounding logistical obligations leading it to free up its financial and human resources to focus exclusively on the production process. Consequently, the quality of the products produced will proportionately increase owing to the dedication of time and energy that is placed in the production process (Rejee & Hamed, 2013, p. 6). 

Pros of outsourcing

It is imperative to understand that a company that outsources will attract the best talent in the market in regards to outsourcing services in a given specialization. Through the competitive bidding process, the company can also create value by choosing the most affordable yet efficient outsourcing service for the logistical supply of services. In the end, the company benefits from cost saving on recurrent expenditure owing to maintenance of space needed for recurrent operations not directly associated with production. In addition, the company also creates high value given that the commodities develop of top notch quality based on the fact that the outsourced services were acquired through competitive bidding processes (Nazeri, et al., 2012, p. 2391). 

Reorganizing the structure of the workforce is among the benefits of outsourcing that the company DiGiTech can immensely benefit. In that esteem, the workforce at the company is organized into departments that prove a bit redundant. For instance, purchases and sales departments are tasked with different aspects of the business logistics that prove central to the successful operations of the business. However, transport and inventory departments serve to duplicate operations of the sales and purchases departments respectively. According to Addo-Tenkorang & Helo (2011, p. 8), doing away with the transport and procurement departments to outsource transport services and merge the purchases department with the inventory department. Moreover, outsourcing inventory services will have the implication of reducing the responsibilities that the purchases department has or is taken to handle. To that extent, the management at DiGiTech should opt to downsize the company staff by reducing redundant employees from the payroll. 

As such, Ahmad & Shroeder  (2003, p. 34), observe that the elimination of redundant departments will have the implication of developing a need for the establishment of leaner more efficient departments. Letting go of a few employees for the sake of enhancing the performance of the business proves critical to the company’s success. Through downsizing DIGiTech can reorganize its staff members to focus on the core functions of the business while other services that are not core functions such as the management of inventory, keeping books of accounts, and payment of salaries can be outsourced. In the end, the reorganized workforce can efficiently meet the objectives of the organization (Tsai, et al., 2010, p. 29). 

Sentiments by Folinas (2013, p. 48), are such that one of the benefits of outsourcing lies in the function of increasing the level of working capital. Hence, outsourcing will only be used for services needed after which no extra payments shall be made to contractors for services not delivered. For instance, by deleting its transport department, DiGiTech will absolve itself of the obligation of having to maintain full-time staff designated as drivers, packaging staff, and mechanical maintenance teams. As such, outsourcing transportation services will mean that the huge burden of maintaining vehicles and keeping salaried transport department staff on the payroll are eliminated. Consequently, the company will only pay for transport when the need arises and hiring a service provider will have the implication of improving capital because lesser costs are incurred due to the reduction of expenditure. Notably, the practice of outsourcing services has the implication of increasing the amount of savings that the business can keep or maintain in its bank accounts (Matende & Ogao, 2013, p. 522).