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Outsourcing in Pursuit of Maximizing Cost

Outsourcing in Pursuit of Maximizing Cost

The art of outsourcing outlines the strategic approach where companies or individuals use outside facilities and resources to conduct activities that the companies could have initially conducted. The primary aim of outsourcing is to achieve an institution’s objectives by charging efficient parties to carry some specific duties. The move to outsource can be attributed to the need for efficiency among other conditions (Jafaar & Rafiq, 2013). Importantly, firms choose to outsource when the need arises, and they have to observe schedules and fixed timeframes to avoid damaging their reputation for failure to deliver. Outsourcing means that a company can give different duties to different firms and still get the credit for the overall product.

Factors Contributing to the Decision to Outsource

Compretudo may have chosen to outsource to these countries because of the availability of resources. Notably, the company chose these two countries because of what they have to offer. Notably, the choice to outsource can be driven by the ease of availability of natural resources. Compretudo is a major supermarket chain in Brazil, and thus it should have diverse commodities to cater to the needs of the clients. Therefore, the firm understands the need to acquire different product lines and thus opts to offer the duties to countries which have these resources. Notably, the move aims to focus on strategic issues and improve efficiency by granting duties to countries with sufficient prowess to handle the orders (Alexandrova, 2009). Therefore, the primary factor may be the availability of resources in these countries.

Secondly, the need to reduce and control the operating cost can be a major driver of outsourcing. The company aims to continue improving and thus the move to outsource can strategically influence the operation cost as a new engine of growth in a firm (Mansor, Abu, Nasir, & Kamil, 2015). The move can contribute to a reduction in cost namely through overcoming compensation cost, administrative fees, and staff time costs. Compretudo may have opted to outsource because it will save the company some money which can be used in improving the efficiency of the firm. Importantly, outsourcing will save on the operational cost and still ensure that the company carries out its duties and responsibilities to its clients.

Thirdly the company may have been influenced by the urge to gain access to world-class capabilities. Outsourcing to other countries presents an opportunity to gain diverse ideas and approaches which may improve the brand image and offer essential changes to the company (Sharma, 2012). Notably, the company’s decision to outsource to two different countries outlines an opportunity to embrace diversity and embrace a new strategic approach in a world where globalization is influencing the way people run their businesses. The move to outsource outlines an opportunity to create ties with other nations. Thus,it improve the image of the corporation while having access to numerous world-class capabilities.

Consequently, the move may be driven by the need to reduce the number of activities that the company undertakes and improve on profits when doing less. Outsourcing if appropriately enacted can outline a situation where a company makes more by doing less (Heimer & Imas, 2014). Therefore, the company may have opted to take this road in pursuit for success and efficiency while offering little input in the whole process. This process ensures that the company looks over all the products and ensures that they are in line with the needs of the customer. The supermarket will have a little role since they have outsourced most of the work and thus they will take the added time to deal with quality and efficiency.

Conversely, the company may have been influenced by the need to share risks with partner companies. The move to outsource will hold the other companies for any shortcomings that may arise. Therefore, Compretudo will share the risks with the other companies within the two distinct nations that it outsourced some businesses too. The move ensures that the other companies will have to produce quality results. Outsourcing improves organizational performance (Nyameboame & Haddud, 2017). Importantly, the move ensures that different companies can deal with specific products and thus offer all their input towards coming up with effective results.

Conclusively, Compretudo has considered the cost of manufacturing, and thus the move to outsource can reduce the cost and maintain or improve on quality. The move may have exceptional results by reducing cost and expanding the company’s reach. The practice of globalization stipulates trade in the contemporary world, and thus the move by Compretudo may be an essential move to improve the brand image and profits (Lahiri, 2015). A lot of government policies allow trade between different nations and thus the firm may enjoy from its strategic move to outsource. Ultimately, the total landed cost resulting from the move to outsource can be lesser than the overall cost it would have used if it failed to outsource. Notably, the move means that the company will spend less on importation cost as the other countries will also contribute to the export cost while the access to raw materials will be easier for companies in their specific countries.

Roles and Relationships between Different Logistics

Getting the Goods across the Supply Chain

It is essential to maintain a sustainable supply chain by meeting the needs of the present without compromising the possibility of other generations from meeting their own needs (Markman & Krause, 2016). Therefore, the movement of goods across the supply chain in the company will entail ensuring that the company carries out all the duties as outlined by Compretudo. The initial phases will entail drawing the details for the outsourcing agreement and ensuring that both companies understand the role they have to play. The company will have to produce goods in line with the specifications and thus looking for suppliers within their country. Importantly, the suppliers will effectively produce essential resources for the production of goods. Consequently, the company will have to look for any more employees they aim to use for the production process and thus the company will be entirely responsible for the production process and the sustainability of the supply chain management within the country.

The supply chain management will entail ensuring that the production process runs smoothly within the guidelines of the host country. Consequently, the company will cater to the packaging of the goods and ensuring they reach the ports in good time and are cleared for transport before being exported to Brazil. The different logistics will have to deal with the overwhelming pressures resulting from the increasing demand for products (Ashby, Leat, & Hudson‐Smith, 2012). Therefore, the different logistics will have to look at numerous factors such as environmental sustainability and ensure that the production process does not undermine the rules of the country or tamper with sustainability.

Carriage of Goods by Sea

The different logistics have to ensure that the transport of products runs smoothly and that the products reach the company in Brazil in accordance with their expectations. Therefore, the move to outsource the production of products means that the countries in different countries will produce the products, package them, and ensure that they are exported through the sea to Brazil. Ultimately, Compretudo will have to pick the products from the port in Brazil after they have arrived safely and distributed them within the appropriate distribution channels. Conversely, Compretudo will have to unpack the products. All the companies involved have different roles to play in ensuring the attainment of sustainability and thus observation transportation expectations and ensuring that the production, transportation, and distribute phases do not limit environmental sustainability. Companies have to look at the deregulation in the hydrocarbon sector within the carriage phase (Millan, Fuente, Pesquera, & Fernandez, 2019). Therefore, diverse companies should adhere to the regulations within their countries and the other companies they are transacting in.

References

Alexandrova, M. (2009). International outsourcing: Incentives, Benefits, and Risks for the Companies in SEE Countries. In 4th International Conference of ASECU “Development Cooperation and Competitiveness,” At the Bucharest Academy of Economic Studies. Bucharest, Romania.

Ashby, A., Leat, M., & Hudson‐Smith, M. (2012). Making connections: A review of supply chain management and sustainability literature. Supply Chain Management: An International Journal, 17(5), 497-516. doi:10.1108/13598541211258573

Heimer, R., & Imas, A. (2018). Doing less with more. SSRN Electronic Journal. doi:10.2139/ssrn.3300456

Jaafar, H. S., & Rafiq, M. (2013). Measuring performance of logistics outsourcing services. Outsourcing Management for Supply Chain Operations and Logistics Service Advances in Logistics, Operations, and Management Science, 344-358. doi:10.4018/978-1-4666-2008-7.ch019

Lahiri, S. (2015). Does outsourcing really improve firm performance? Empirical evidence and research agenda. International Journal of Management Reviews, 18(4), 464-497. doi:10.1111/ijmr.12075

Mansor, M. F., Abu, N. H., Nasir, H., & Kamil, S. (2015). The effect of cost reduction and business strategy on human resource outsourcing practicing: A study of Malaysian government link company. International Symposium on Technology Management & Emerging Technologies, (pp. 263-266). Langkawi, Malaysia.

Markman, G. D., & Krause, D. (2016). Theory building surrounding sustainable supply chain management: Assessing what we know, exploring where to go. Journal of Supply Chain Management, 52(2), 3-10. doi:10.1111/jscm.12105

Millán, P. C., Fuente, M. D., Fernández, X. L., & Pesquera, M. Á. (2019). The impact of deregulation in the hydrocarbon sector: Evidence at the main Spanish ports of import of hydrocarbons (1986-2013). International Journal of Shipping and Transport Logistics, 11(1), 41. doi:10.1504/ijstl.2019.096865

Nyameboame, J., & Haddud, A. (2017). Exploring the impact of outsourcing on organizational performance. Journal of Global Operations and Strategic Sourcing, 10(3), 362-387. doi:10.1108/jgoss-01-2017-0001

Sharma, P. (2012). Offshore outsourcing of customer services – boon or bane? Journal of Services Marketing, 26(5), 352-364. doi:10.1108/08876041211245272

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