Question

- What is outsourcing?

- When would it make sense based on quantitative factors only for companies like Toyota and Boeing to outsource?

- What are 3 qualitative factors that companies like Toyota and Boeing should consider before outsourcing?

Answer 1

1. Outsourcing means giving on contract to a third party specialised in the activity to carry out that activity on behalf of the company.

2. For companies like Boeing and Toyota it will be benificial to outsource when the cost incurred in doing the work by them is more than what is charged by the outsider.

Price disparity occurs because those third party to whom work is outsourced is doing it in bulk for various vendors bringing concepts of economies of scale into play, have speciality in the field to save cost thus their cutting down overall cost

3. Three qualititative factors would be expertise of the manpower to whom outsourcing is done, reliability of the outsourcing partners based upon general market perception or personal experience, redudancy to flexibly handle large requirements.