Outsourcing to Low Cost Countries
Advantages and Drawbacks
Outsourcing represents the process employed by businesses to decrease outlays through issuing some tasks to outside suppliers instead of seeking to complete it internally. Low Cost Countries denote procurement policies where a company sources from nations that offer cheap labor and low costs of production in an effort of lessening the outlays incurred. One of the advantages of outsourcing to Low Cost Countries is a reduction in production and labor expenses (Tayauova, 2012). This goes a long way to boosting profitability and competitiveness of the outsourcing firm. Another benefit is quickness and expertise. Since outsourcing is mainly done to vendors who are professionals in their line of operation, they have the expertise and equipment required to accomplish the assigned tasks within the shortest time possible while upholding quality. On the other hand, one of the disadvantages of outsourcing to Low Cost Countries is hidden costs. Such costs, which are entailed in the signing of contracts across the borders, may at times pose severe threats to the profitability of the tasks outsourced. Another drawback is poor customer-centeredness as the outsourced vendor could be handling the needs of multiple businesses at the same time hence lacking sufficient focus on the requirements of the clients of the outsourcing companies.
Mitigating the Risks
The avoidance of risk is paramount to enhancing the success of the outsourcing company. Effective mitigation of risks could be realized by putting together a strategy that is agreed upon by both the outsourcing company and the vendor (Olson & Wu, 2011). Such a strategy should call for timelines for regular meetings, timely update on any arising issue, the creation of necessary changes to assist in the realization of operational and business objectives, and the identification of major personnel with whom the outsourcing company can get in touch if the need arises.
Olson, D. L., & Wu, D. (2011). Risk management models for supply chain: A scenario analysis of outsourcing to China. Supply Chain Management: An International Journal, 16(6), 401-408.
Tayauova, G. (2012). Advantages and disadvantages of outsourcing: Analysis of outsourcing practices of Kazakhstan banks. Procedia-Social and Behavioral Sciences, 41, 188-195.