- As a business manager, how much do you want to be involved in the outsourcing decision? Do you want the decision rights or just input rights?
- Which is better - best of breed or single sourcing? What has been your experience with outsourcing?
- What do you think are the challenges in managing vendors (or clients)?
What stands out for you in outsourcing now that you have a chance to reflect some more?
So many people are outsourcing these days. As a Manager I feel that you must be as involved in the process of outsourcing as you can. You need to be aware of the details of contracts with vendors and I believe you need the right to have input and decision making. It is so important in our society today to keep your finger right on the pulse of people working for you whether they are a outsourced vendor or an employee outright. There are so many challenges in managing vendors who are working for you. An example of someone who does not manage their vendor properly is Direct TV. The outsource their installation and labor to vendors. These people rarely show when they are supposed to, make up stories about why they can't be there, and cancel appointments repeatedly. It took my parents four appointments and over a month of time to just get an upgrade. When they complained Direct TV told them they had no control over their vendors. As a manager you must be able to have control of your outsourcing or it can ruin your business and relationship with your main target, your customer.
ReplyDeleteFor a company to effectively outsource, it must adopt the trends of the digital economy, recognizing the need to outsource non-core business functions in which the company has no expertise. The logistics behind deciding the company’s outsourcing strategy is complex, to say the least. We saw in the Kodak case this week that business managers and IT managers alike were early adopters of the digital economy. Kodak recognized its weaknesses and capitalized on its strengths and made an organizational change because of this recognition- it outsourced. To comment on Dr. Schwarz’s question the amount of business management involvement in outsourcing decisions: it depends.
ReplyDeleteI found some great tips for business managers when they decide to outsource from a document titled: The Outsourcing Gamble. A manager must define their need, use tangible, measurable objectives, define constraints up front, create a written agreement with your vendor, know your payment plan, review orders, actively communicate, and provide a final evaluation. No matter the level of involvement in these outsourcing decisions for managers, they should certainly consider these tips with venturing into strategic alliances.
Here is the document online:
http://www.graphicmatter.com/docs/MarketingAndDesign/GM_OutsourcingGamble.pdf
As to answer the first question, as a manager, one should be involved in the outsourcing process. However, the rights for decision-making or just putting in inputs would depend on what process needs to be outsourced. For instance, if it is in the engineering department of a company, maybe a manger could give his inputs but the decision should be in the hands of the chief engineer of the company.
ReplyDeleteSingle outsourcing is definitely a better choice because it can reduce down the cost/investment and provide scope for better relationship. However, the big Q here is that - is it possible to find a company which is the best in all. Like in the Kodak case, Kodak outsourced three different companies, as to get the best in each category. But if there were to be a company which could provide the best service in all three categories, then, definitely, Kodak could have gone for that.
I think if you are going to outsource the amount of control depends on the function you outsource. If you are outsourcing something that can affect the company than control needs to be extremely high. If the function is far from the customer, than control can be less strenuous since there is less of a chance of it affecting the customer. A company can bounce back from an outsourced function that doesn't affect the customer, but they rarely bounce back from one that negatively impacted the customer in a major way.
ReplyDeleteI am going to agree with Pravina. If you could find a one stop outsource solution would be ideal. Problem is this will be hard to find unless the outsource solution is made especially for your industry.
Anytime you manage another company there will be great challenger. The biggest factor is that you have no control over the personnel that company hires. This could become a big issue if that company is not enforce high standards.
I want to focus on the challenges of managing vendors! I have worked for numerous construction contractors and 85% of being a successful contractor is knowing how to manage your subcontractors for whom which you are responsible for in every aspect of the job. These vendors/clients/subcontractors are not too worried about whether or not you are getting the most bang for your buck because they are going to watch their back and thats it. I think the best way to manage these types of people are to try to build a friendly but business-like relationship. If you can be stern with a close friend then respect will be given and hopefully profits will be gained.
ReplyDeleteA lot of our talk in class about single sourcing vs. best of breed had to do with the ease of having everything outsourced under one roof in the former and having the excellent quality of the difference serviced from the latter. However, there is one other pitfall that you have to watch out for and that is the power that can be lost from single sourcing. Let’s say you have a company and you decide that you are going to outsource everything to one company. You set up a system so that all of your activities are done through this company and things are great. When everything is going well, the company you are outsourcing to decide it is going to increase its price. This leaves you in an awkward place. It would cost too much to pull up stakes and go to someone new and it is never good to have someone have that kind of control. I do like single sourcing, it just needs to be done in a way that will insure that you can still be flexible with how you do business.
ReplyDeleteAs a business manager, I'd want to be the decision maker. People will shy away from this responsibility because you're cutting jobs, and no one like having to fire people. However, as a successful manager, I think you have to be involved in all of these decisions, the best leaders always are.
ReplyDeleteThe best of breed approach is the best. That being said, there is a caveat. The costs of working with multiple vendors should be factored in. If a vendor is the lowest on one product and close on another, the cost of working with multiple vendors vs a single vendor may mean it's cheaper to work with a single vendor. The final decision will vary based on circumstances, but it should be made with verifiable and quantifiable reasoning.
It is challenging working with multiple vendors, and those that make it more challenging only increase the cost you should factor into doing business with them. You should design a process that works for you, then use your buying power to try to bring them around to using your system.
As a mechanical engineer I am outsourcing my manufacturing projects when we do not have the right equipments and facilities. I always find the best shop with minimum price and move parts from shop to shop to minimize the price. In many cases we have to change the outsourcing partner due to technical considerations. The mechanical shops are limited in purchasing expensive equipments and it is indeed rare to have all advanced equipments in a shop, or if it is there the pricing of that shop is so high.
ReplyDeleteThen the decision between minimum time of manufacturing and minimum price is involved in these kind of projects.
Thanks for hearing,
When it comes to outsourcing, its always better to go back to the Golden rule, which states that there is no such thing as technology project, only business projects about technology. Business managers have comprehensive knowledge about the company and its business projects, hence should have the final say on what technology or process to outsource instead of just throwing in some input. This way company can choose effectively what process to outsource and focus on their core competencies.
ReplyDeleteOutsourcing can be disastrous if it is not managed properly. It is always difficult to deal with vendors because of differnces in the company core values and operations, when you throw in multiple such vendors, it can be a real pain to manage the whole setup properly. Hence companies should look for a single vendor who can adequately manage all the outsourced processes.
You can have multiple vendors who are the best at what they do, but if you can not manage them properly the whole outsourcing setup can be a complete fiasco.
If there was a magic formula that would meet clients’ expectations, than certainly every outsourcing company out there would like to have it. But every client is different from one another, and one can only discern what a particular client wants by actually talking to and discussing a project with a client and by keeping sure that the communications lines are open between them.
ReplyDeleteWhich is better - best of breed or single sourcing? What has been your experience with outsourcing?
ReplyDeleteI think this question answers whether or not the business manager or another employee should handle outsourcing. If a company such as Human Resources decides to outsource multiple functions such as Pensions and Payroll to the best of breed companies out there, then it can get sticky and require lots of time. A business manager probably doesnt have time to handle it all. If the company decides to single source to one company, management would be less strenuous and time consuming.
As a manager, I believe the decision to outsource ultimately should fall on the shoulders of the manager. As an effective manager, one has to be able to reach out to different parts of the firm that will be affected and figure out what will be gained and lost as a result of the decision. All these things should be considered and a final decision should be made by the manager. Its tough to decide because of all the efficiencies that can be gained. A major problem with outsourcing is the lost jobs that individuals will face as a result of the decision. While these can be tough, it still has to be the manager's choice.
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