Outsourcing: Pros, Cons & Examples - Essay Sample

Introduction

Outsourcing is one of the most practiced processes for companies under different circumstances. For instance, a company might opt to practice outsourcing when its product demands have hiked, and the company cannot meet the demand, maybe due to limited operation space or the minimum workforce. However, some accompanying disadvantages might accrue from outsourcing; for instance, the supplier products or services might be different from the original supplier hence severely affecting the business of the company.

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Necessary Information the Fudge Factory Need Concerning Outsourcing Decision

From a personal point of view in the Fudge factory scenario, the board members need to have an intensive analysis of the situation before coming up with the decision of outsourcing. Also, they should do a lot of customer and market research and be able to see if they can meet the market demands through outsourcing or opt for expansion options. Moreover, it is more evident Bob's factory has limited space of operation, and it's designed to fulfill only a few objectives of serving its consumers, and the expansion process might take a long duration and more costs, so the decision to outsource might save them a lot of pressure. Also, outsourcing process is a survey on its own since throughout the duration the Bob factory will be able to monitor market trends and continue planning on whether to expand their operations or have another branch to meet the market demands.

Financial Information Regarding Outsourcing

Outsourcing requires an in-depth analysis of the financial status of the company and what benefits it will bring to the company after going for that decision. To make the outsourcing business successful, the Bob factory should be willing to invest in the external financial expert to conduct a deep risk analysis platform for the company to know if it is worth their investment and how much revenue they will be receiving. If the financial information is convenient enough in that it helps in risk sharing and reduces their costs, then the factory will have no choice but to opt for that decision to grow after all its part of the development process to the company's side. Also, if the outsourcing does not rely heavily on the financial status of the company for example such as technological expenses, then Bob's factory should consider going for the outsourcing, and then in future, they might decide to change their method of operation once they have monitored the market trends and have a strong foundation.

Summarize if Bob Should Outsource

Before the company decides to outsource, there are more factors to be considered apart from just the financial part, such as the operations costs and the effects of the workers and their performance in general. However, from the scenario, Fudge Company will have to outsource because, after evaluation of the factors, it fits in the situation because the company cannot risk increasing their production, and they do not know how stable the market demand. Also, outsourcing has the comprises of the risk-sharing among the two partners in that in case of the market failure, the company is still able to revive to its regular operation or financial state. However, Bob's factory still has some hesitation about the decision or slightly can expand their operations; then, they should not outsource and be ready to suffer the losses in case of market changes.

References

Globerman, S., & Vining, A. R. (2017). The outsourcing decision: A strategic framework. In Global outsourcing strategies (pp. 27-40). Routledge.

Nero, R. L. (2018). Risks, Benefits, and Perceived Effectiveness of Outsourcing it Network Security in Small Businesses: A Multiple-Case Study (Doctoral dissertation, Capella University).