Last Updated on September 13, 2023
When you consider outsourcing, you need to ensure that you have the right information. Therefore, this article addresses the question of which of the following statements is correct, while looking at outsourcing.
Question: Which of the following statements is true of the outsourcing decision?
Which of the following statements is true of the outsourcing decision?
a. Outsourcing decreases the extent of a company’s vertical integration.
b. Reputation of the supplier is a critical issue in an outsourcing decision.
c. An outsourcing decision involves a purchase offer from a customer at a lower-than-normal selling price.
What is outsourcing?
To define outsourcing you need to ask: What is business outsourcing? Therefore, in essence, outsourcing meaning is a business practice and different activities in which a business makes use of an external company to take over some of its internal functions. The core reason for this is that completing the core work internally is too expensive; therefore to outsource it is more cost-effective. Moreover, outsourcing services is linked to cost-cutting, as the business reduces its operating costs. Plus, the business will outsource to BPO companies, such as the renowned company, Aristo Sourcing.
The true answer
Which of the above statements is true of outsourcing? The answer to the question is both A and B statements. In other words, outsourcing can decrease the extent of a business’ vertical integration; while establishing the reputation of the outsourcing service provider is a key issue in the outsourcing decision.
Also, outsourcing both decreases the extent of a company’s vertical integration and establishes the supplier: two critical issues in an outsourcing decision.
a. Outsourcing decreases the extent of a company’s vertical integration.
The sustainability of complex global supply chains can be accomplished using one of two main methods: vertical integration or outsourcing.
Vertical integration
Firstly, vertical integration implies that a business or firm combines parts of its production with another business. However, this approach is not without its flaws. Firstly, this approach is best for larger companies. These businesses will have issues to contend with such as observing internal events. Monitoring of such events can become complex and mind-numbing tasks. Businesses may also not execute the monitoring owing to technical or financial limitations. In contrast, outsourcing offers more benefits to small to medium-sized businesses.
Outsourcing
Although vertical integration provides many benefits, this method is laborious and costly in practice. Outsourcing usually offers a competitive benefit for a company. Additionally, although globalization can be seen as the driver for outsourcing, there is the statement that it increases job dissatisfaction among workers. However, a higher level of outsourcing enables a firm to have better control on all outsourced. Also, it reduces political risk by enabling the company to avoid investing in plants and equipment abroad.
The benefits of outsourcing
Outsourcing is cost-saving
When a business outsources a service or services to an outsourcing company, these services can include payroll, technology, customer services, or research, which are some popular examples of outsourcing. These types of services are outsourced because this can cut the business operations costs, while normally boosting the efficiency of the business. More than just the obvious cost-savings, the business can also save on additional costs. These costs include more than mere salaries; there are also taxes, benefits, and investing in business equipment, infrastructure and information systems to be considered.
Outsourcing to increase efficiency
If the business is an eCommerce business, and trades internationally, being available for more business hours is a benefit. The outsourcing service can be located in a different time zone, or have teams working shifts, especially focusing on their English markets. The online business can then potentially reach more customers. Moreover, by having the time-consuming tasks outsourced, the core team of experts can focus on their principal tasks. This will boost productivity.
b. Reputation of the supplier is a critical issue in an outsourcing decision
Going cheap might, on paper, save you money, but be careful as this strategy could affect an organization negatively. Look at the reputation of the outsourcing service provider. This is really an important issue a firm should consider. What a business should take into account is whether the outsourcing company is trustworthy and whether there is support to manage the virtual assistants (VAs or remote assistants) they supply. Moreover, as a business, you want deliverables to be presented on time – no excuses. If you are a small or medium-sized business, researching the reputation of the outsourcing service is critical. This will eliminate any risks.
The bottom line
The answer to the question of which of the following statements is true of the outsourcing decision: a. Outsourcing decreases the extent of a company’s vertical integration and b. The reputation of the supplier is a critical issue in an outsourcing decision. Outsourcing can help a business to upscale faster. This is because, with outsourcing, a business can reduce its business expenses and increase its productivity, while also onboarding talent that they might be lacking. This staffing solution can especially benefit small and medium-sized businesses or SMEs. However, large international corporations are leading the growth of outsourcing. Yet, before you outsource, it’s your responsibility to consider your needs, and what you can do to achieve your goal. You can, for instance, make use of a free call to the reputable company Aristo Sourcing. Also, you can then engage with our outsourcing expert, who will offer you no-nonsense advice. You can ask questions to get the solutions that will work for you, and your firm. If you want to make use of this complimentary service, just click here.
