Question

How does outsourcing quantitatively affect a company’s operations?

• A : It increases operating costs.

• B : It frees up resources used.

• C : It decreases operating costs.

• D : It increases excess capacity.

Answer 1

Answer is option C; it decreases operating costs

One of the major benefit of outsourcing is the cost savings that outsourcing brings to the company. When a work or portion of work is outsourced companies can reduce operational and recruitment costs. Hiring of trained individuals, purchase of specialised machines and operating costs can be minimized to a great extent with outsourcing. Amount of overhead expenses will be lowered if company enters into an outsourcing.