Outsourcing is it right to compromise Quality to Reduce Cost

4 Literature Content………………………………………………………………………………. 5 Outsourcing………………………………………………………………………………6 Cost Reduction…………………………………………………………………………. 7 Quality……………………………………………………………………………………10 Methodology……………………………………………………………………………………. 11 Research Philosophy……………………………………………………………………. 11 Research Approach………………………………………………………………………11 Research Strategy………………………………………………………………………. They have this belief that it may save them money (reduce some costs) but will compromise quality. According to SAXENA & BHARADWAJ (2007), companies relayed frustration with the quality of work being offered. However, most businesses asserted that they opted for the cheapest outsourcing option in place of the best quality. Almost all the businesses, about 90% of them admit to the fact that the emphasis on cost was growing the possibility of their projects failing. It therefore seems like outsourcing has this image of reducing costs but then ends up compromising on the quality, hence tainting a firm’s reputation or brand image. General Objectives 1. To analyze outsourcing and its effect on cost reduction and quality of operation/ production in a business Specific Objectives 1.

To weigh the significance of quality vis a vis cost reduction in a business 2. To study the economic difference between reducing operation costs and maintaining production quality 3. To study the significance of outsourcing with regards to cost reduction 4. The benefit of cost reduction is possible thanks to the economies of scale (INDIAN COMMERCE ASSOCIATION. 1948, p241), vendor’s specialty knowledge (HALSALL& DUNN 2013, p. 97) and the reduction of indirect costs (SCHNIEDERJANS, SCHNIEDERJANS & SCHNIEDERJANS 2005; WILLCOCKS, LACITY & SAUER 2017; and GREAT BRITAIN 2012). The cost reduction is always the most apparent value of outsourcing, but is never the only benefit. Strategy compelled outsourcing offers vital advantaged to company, namely the emphasis on prime competencies (SAXENA & BHARADWAJ 2007; SOPLE 2016; WEISSMAN 2005; and WILLCOCKS, LACITY& SAUER 2017) and augmented flexibility (ANANDKUMAR & BISWAS 2008; KOBAYASHI-HILLARY 2005; GREAT BRITAIN 2012).

One major aspect of the product variation links to the quality of the outsourced product and service. If the quality of products and service varies, to a point where the clients are buying inferior products, then marketing would badly be affected (WEISSMAN 2005, p89). The benefits that come as a result of outsourcing can offer pivotal competitive edge for companies, but are complemented by significant costs that can often be only mitigated and not completely eliminated. Outsourcing needs the company to monitor it (SAXENA & BHARADWAJ 2007; SOPLE 2016; WEISSMAN 2005; and WILLCOCKS, LACITY& SAUER 2017), which ends up increasing the overhead costs. Employees lose the know-how and insight into the presented outsourced activity with time (HALVEY& MELBY 2007; LONSDALE & COX 1998; SOPLE 2016) leading to lower capacity and the inability to innovate (WILLCOCKS, CULLEN & CRAIG 2011 p.

4% every year for the next decade, going past a total value of 288 billion dollars. Cost Reduction CLICK & DUENING (2005, p. 214) asserts that the possibility of doing the same task with minimal costs might be the first incentive for a business or organization and is, with conviction, the most went after in practice. There is no requisite to create awareness of this particular pro, but absolutely it is vital to explain why these cost reduction are probable (HALSALL & DUNN 2013, p. Outsourcing of particular activity outcome in transaction costs entails finding enough negotiating and vendor contract, but also generates constant extra overhead cost to control the merchant’s performance and update the outsourcing contract to match the business’s needs (ANANDKUMAR & BISWAS 2008, p. There exists a direct link between quality and the number of sales; therefore, when products or services are of high quality, the number of sales will be high, and the revenue & profits will balloon (HALSALL & DUNN 2013, p.

A reverse of that would bring about shrinking of clientele base and profits. According to KOBAYASHI-HILLARY (2005, p. 86) cost reduction stays to be the key driver of most companies to outsource but quality plays the greatest factor when it comes to picking an outsourcing partner. In actual sense, even as most companies have gone conventional and outsource a number of their operations offshore and/or with an extra provider, there are still businesses that are hesitant to entrust some of their operations to the third party (LONSDALE & COX 1998, p71). While outsourcing is merely a percentage of the cost of having business operations within the house, it does not mean that quality ought to be compromised. Cost reduction stays to be the key driver of most companies to outsource but quality plays the greatest factor when it comes to picking an outsourcing partner.

Methodology Research Philosophy The study will take through an epistemology philosophical stance because it is by fact true and confirmed by the part of the objective of outsourcing which is cost reduction. Organizations employ outsourcing as a strategy to reduce their costs in production and service delivery. What these organizations forget and that is a fact is that in order to reduce the costs tremendously, and organization or business will have to compromise its quality. The second questionnaire will be presented to the personnel manager and the accountant, different economic measures, covering ownership and training and labor. The qualitative interviews will comprise the structure method of interviews, which will be done to the management of the various companies. Primary decisions concerning the interview questions and those personnel to interview will be reached at.

This is to mean that much planning has to be done and inquiries have to be sent regarding the availability of these managers, and their capacity to respond to some of the structured queries; which are aimed at giving a direct hint of the effect of outsourcing on quality of products and services. Time Horizons The data collection process is required to take about a week. In order to measure or test the quality of services or products, it will be imperative to employ the responses to the survey questions concerning the percentage of service or products or even the services by which a company provides quality guarantees, and hypothesize a variable labeled Guarantee therefore. This particular measure is an ancillary measure equated to the product quality.

This is to mean that, there exists a positive correlation between the fundamental product and service quality and the quality guarantee. A particular descriptive variable in this research is the degree of outsourcing for instance, the segment of spare parts bought from outside dealers. In the done survey, there is a query concerning the proportion of a company’s parts, with regards to its cost, that are manufacture in the company. Lastly, the analysis will incorporate the city dummies and the industry dummies to make up for the city fixed effects and the city fixed effects. The primary strength of this method of data collection is that the information acquired is first hand and relates directly to the topic of study.

Additionally, it enables the interaction between the researcher and the study population, giving space for a much qualitative generation of ideas. Some of the limitations of the method of data collection are that it takes a lot of time to do the surveys since not all the senior managers are in one position. Not all the senior managers will be willing to respond to our surveys, and not all will also fill the questionnaires. It is also important to note that cost reduction has a potential to save some money, though the saved money cannot account for the lost money as a result of lost clientele base. There exists a direct link between quality and the number of sales; therefore, when products or services are of high quality, the number of sales will be high, and the revenue & profits will balloon.

A reverse of that would bring about shrinking of clientele base and profits. Also, whilst it is a fact that concentrating solely on cost reduction without much care on the quality can bring about bad customer perception concerning the company brand it does not mean that outsourcing operations lead to poor quality. While outsourcing is merely a percentage of the cost of having business operations within the house, it does not mean that quality ought to be compromised. aspx?p=408990. ANDERSON, E. M. , & TRINKLE, B.  Outsourcing the sales function: the real cost of field sales. CLICK, R. L. , & DUENING, T. N.  Business process outsourcing: the competitive advantage.  Essentials of business process outsourcing. Hoboken, N. J. , John Wiley & Sons. http://public. http://rbdigital.