What's Your Strategy For Outsourcing?

June 16, 2005
Most companies view outsourcing from a cost-reduction perspective and a source for non-core operations rather than a way to grow revenue. The good news is that this viewpoint is hitting the mark, with companies seeing an average cost savings of 13-15%. ...

Most companies view outsourcing from a cost-reduction perspective and a source for non-core operations rather than a way to grow revenue. The good news is that this viewpoint is hitting the mark, with companies seeing an average cost savings of 13-15%. Those who viewed outsourcing as a means of growing revenue fell short of their expectations.

That's according to a recently released study, "Outsourcing Strategically for Sustainable Competitive Advantage," by CAPS: Center for Strategic Supply Research ,an organization affiliated with the Institute for Supply Management and the W. P. Carey School of Business at Arizona State University and A.T. Kearney that surveyed 165 companies from 24 industries.

"It's clear there are two different approaches to outsourcing at work," said Bill Markham, a principal with A.T. Kearney and co-leader of the study. "Companies seeking quick savings focus their efforts on finding less expensive alternatives to operating their business today. Companies focused on tomorrow's business needs are seeking more significant long-term benefits and looking to leverage marketplace skills, technologies and scale to cut costs and increase revenue."

While it appears everyone is outsourcing everything, the study found that 86% of the respondents outsource less than 25% of their activities. Of those companies surveyed, 36% outsourced in the IT area, followed by 32% in distribution/fulfillment, 30% in legal/regulatory affairs and 24% in manufacturing/operations.

Some advice for those exploring outsourcing:

  • Look at the political and social demographics of emerging economies.
  • Consider the dwindling natural resource supplies and how it will affect the future.
  • Seek skills and technologies from the marketplace rather than assuming these skills must be developed internally.
  • Align the roles and responsibilities from outsourcing activities across the corporate functions involved.

A copy of the report can be downloaded from http://www.atkearney.com or http://www.capsresearch.org.

Interested in information related to this topic? Subscribe to our weekly Value Chain eNewsletter.

Popular Sponsored Recommendations

Four Common OT Cybersecurity Pitfalls for Manufacturers

April 4, 2023
For the last six years, Dragos has leveraged their Professional Services team to develop an on-the-ground understanding of the realities facing the industrial community and to...

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

How Manufacturers Can Optimize Operations with Weather Intelligence

Nov. 2, 2023
The bad news? Severe weather has emerged as one of the biggest threats to continuity and safety in manufacturing. The good news? The intelligence solutions that build weather ...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!