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Outsourcing Vs. Insourcing. What Is The Best Solution For Your Company?
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The concepts of outsourcing and insourcing services have emerged from the process of business process re-engineering. BPR emerged as a result of increased global competition which meant that companies had to find out ways to improve their efficiency and thus productivity.
The concepts of outsourcing and insourcing services have emerged from the process of business process re-engineering. BPR emerged as a result of increased global competition which meant that companies had to find out ways to improve their efficiency and thus productivity. BPR therefore seeks to simplify the process flows within a company as well as optimise the timeliness of its operations. The workflow within the organisation and between companies needs to be redesigned. This is done in order to reduce operational costs and improve on quality. This process is done by considering the effects of every activity and then organising around that effect instead of around tasks. BPR also enables the management of resources that are geographically scattered to be done in a centralised manner. It helps a business understand its operations better and seek ways to improve these processes. Most business experts will advise that outsourcing and insourcing services are the way to go nowadays.
Business process outsourcing is contracting with outside parties to provide some services that fall outside the core area of a companys operations. There are various reasons why a business will outsource its services. A business only has limited resources. These resources need to be focused on areas of key competencies for the business to be productive. Financial resources are hard to come by during these hard economic times. If there is a way to minimize the overhead costs of a business, then business process re-engineering seeks to have you following those ways. Outsourcing is one way of reducing overhead costs.
Time is also a limited resource for a business. When you outsource, you are left with more time to concentrate on your competencies. It is difficult to get skilled employees for every activity of a business all under one roof. When you outsource, you deal with the shortages of skilled labour you might be experiencing. As a global business, you might want to be in operation 24/7. The cost of running nightshifts might be expensive. You can go around this by outsourcing to a different time zone. This means that when you are asleep, the company you have outsourced to is running your business at that time in that particular time zone.
Insourcing services in business process re-engineering are the opposite of outsourcing. However, both outsourcing and insourcing services are aimed at increasing the productivity of your business. Insourcing is broad and can be used in the context of a company or a country. For instance, a country may decide to use only local contractors for its projects and that is referred to as insourcing. Likewise, a company may decide to use clusters of employees to provide certain services. It may also bring in an expert into the company for a short period of time to offer certain services. That is insourcing still. There are instances where outsourcing and insourcing services overlap. For instance, when an South African mobile phone manufacturer brings in a Chinese expert to work on the technology of the phone, it is insourcing to South Africa and outsourcing to China. It is important not to lose focus of the main goal of business process re-engineering which is to improve productivity.
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