Advantages and Disadvantages of Outsourcing Business Functions: A Case Study of Woolworths Group

This research paper examines the advantages and disadvantages of outsourcing business functions, using Woolworths Group as a case study. It explores the benefits of cost savings, improved quality, and increased focus on core business functions. However, it also highlights the potential risks associated with outsourcing, such as loss of control, security breaches, and negative public perception. The paper analyzes various outsourcing techniques employed by Woolworths Group, including cost optimization, regular meetings with suppliers, and efficient time management. It concludes that outsourcing can be a valuable tool for businesses, but it requires careful planning and execution to mitigate potential risks.

Advantages and Disadvantages of
Outsourcing Business Functions
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Introduction: the detailed analysis is made regarding the outsourcing functions of
Woolworths Group and its advantage and disadvantages are made on business functions.
Outsourcing is doing certain job functions which are done outside a company whether to any
individual or company. It becomes a high trend in human resources from the past decade.
Woolworth’s group is an Australian company having retail interest in all over the country.
This is the second largest company in terms of revenue .the net income of the company is a$
1.2 billion in 2016.
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Project objective:
 The objective of the project is to analyse the importance of outsourcing in business
operations and functions.
 Woolworths is able to get an advantage from the outsourcing to reduce the burden of
work or not.
 The company achieves the desired objective with the help of outsourcing.
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Project scope: The scope of this project to determine the benefits and drawbacks of
outsourcing in business operations and functions. The company intends to attain the desired
goals and aims in best effective manner with minimum cost and good quality.
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Literature Review:
Outsourcing is the practice of business to hire a party from outside the company to perform
several services and creates productivity that were performed in company by own staff and
employees. This is considered as the cost cutting method which affects the jobs of employees
from customer support to producing to the back office. It is recognised as a business strategy
and to become the important part of international economics of business (Oshri , et. al.,
2015). The concept of outsourcing is not adopted in many countries due to some
controversies. Generally people say that it harms the jobs of domestic people, basically in the
manufacturing sector. Supporters of the outsourcing say that it creates an incentive for the
corporations and businesses to allocate the resources, and outsourcing helps in to maintain the
free market economies on global scale.
Outsourcing allows Woolworth to focus on the cure business and can create a competitive
advantage by decreasing the functional and operational cost of business. Of example,
company can outsource the network management function but with the support of end user in
house. It can provide a better balance and support to employees. Organisations use
outsourcing as a good strategy to increase the customer service reducing the cost and
improves the quality (Chen, et. al., 2014). It can be temporary and permanent arrangement to
connect the gap in staffing, for better techniques and t make improvements in faulty design of
product. at the time of looking the outsourcing opportunities, any organisation must look at
sound areas and consider the components of that area that which part of the function is to be
outsourced or not. Companies cam outsourced the functions of certain areas such as human
resources, payroll services, cleaning services, facility management, manufacturing, call
centre, order fulfilment, accounting services and marketing services.
Advantages of Outsourcing:
The outsourcing is very beneficial for the company in terms of various manners such as cost
savings. The cost of the Woolworth is saved at large by the method of outsourcing. The cost
of employee compensation, cost associated in related to work space, office space cost etc. the
company focuses on core business functions with the expertise and skills. When
organisations wants to go out from their expertise, that achieve business process and
functions which cannot be as knowledgeable and take away from the main focus. For
example a grocery store wants to add a florist in their business operation, in case company
give more focus on florist then it will lost the core business of tore which is grocery (Gurung
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and Prater, 2017). It improves the quality by using the more skilled expertise person who has
high level of knowledge and experience in special business process. For example, contract a
cleaning service, an outside service have the resources of proper training, hiring, facility
inspections, which cannot be available when the function were done in house operations. Part
from that this is the big advantage of outsourcing that customer satisfaction. With the making
of contract with vendor such person as re bound to provide better quality services and
products to company. for example, if Information technology fancying is outsourced due to
the techniques fault, this is the responsibility of vendor to adopt a good method which can be
replace it in better manner from the existing one and to meet the needs of customers as per
their requirements (Magelssen, et. al., 2015), Outsourcing is also useful in operational
efficiency by providing the exposure to special system to vendor specialisation gives more
efficiency that permits for fast turnaround time and advanced level of quality. It also shares
the risk by analysing it with the proper determination and evaluation. Outsourcing has certain
components in the business that helps in the organisation to shift from on hand to other
responsibilities to outsourced vendor. Vendor is a specialist that makes a planning to
mitigate the risk factors and try to reduce it with best effective manner. The recruitment cost
is also reducing by the help of outsourcing and to minimize it with certain level. This is the
best advantage of offshore outsourcing.
Disadvantages of outsourcing:
Outsourcing has many advantages which provide several benefits to different people of the
organisation internally and externally. Apart from that due to the use of outsourcing the
company faces several problems and other individual also. Outsourcing exposes the
organisation with potential risk and certain legal exposure. For example, if any part of the car
is damage or occurring with some problem, the car manufacturer takes the burden to correct
the damage or harm the reputataion of car maker. The other disadvantage is, unless the
contract is particularly identifies in measurable process in harms of the quality service
reporting, it can be a poor service experience of quality (Gunasekaran, et. al.,2015). Some
contracts are made with intention to leave the service for saving the cost. When work is
outsourced in different country and the people don’t get the understanding of host country
language, then it creates several problems due to the language dissatisfaction and to also
create the misunderstanding between parties and customers due to strong accent of language.
The opinion of public and employees also creates some drawbacks due to negative perception
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of people in regard with outsourcing and the sympathy of losing the jobs. There is a
requirement to change the thinking of employees and views of public opinion. The poor
organisational knowledge is also the reason of bad effect, an outsourced employee not has
proper knowledge and understanding of the operations and functions of organisation as
compare to the regular employee. Labour of the company also increases some problems; it
means organised labour in the company has very sound feeling related to the outsourcing to
different countries having less living standard and low working conditions. This view point
can affect by the response of workforce in the outsourcing which can affect the productivity
of company. When company is not following the legal compliances and safety which s very
important then several issues may rose. Processes that are to be outsourced have to manage
with due diligence and legal compliances of system security. For example, IT function
outsourcing requires to access the secret data of customer for the benefit of own. The
employee layoff is also the disadvantage due to outsourcing common results with
requirement of reducing the staffing level (Patricia, 2017). This is difficult to the adoption
and managed accurately, so it creates a negative impact on the remaining employees of
company. There is a risk of leaking the confidential data in the outsourcing functions of
human resource management, recruitment services and payroll etc. it covers a risk of
exposing the secret information of company to third party. There is a problem of
synchronising the deliverables when company is not choosing the preferred outsourced
partner the it many face timely delivery of project, quality of work, work done in
irresponsible manner. So it is better to not outsource the work to third person and do itself in
this situation (Wachira, et. al., 2016). There is a lack of customer focus due to the
inexperienced people and lack of input the technique in best manner then several problems
are raised. Everthing has both aspects positive and negative, outsourcing is beneficial for the
company in many ways but it also creates other problems due to lack of knowledge and
outsourcing.
Tools and techniques of the outsourcing businesses
According to Gökalp, et. al., (2017), there are so many techniques of the outsourcing
businesses, which helps them in running their business efficiently. Some of those techniques
are discussed further- Big saving and small changes- It is the most important techniques
which get used by the Wools worth. This business tries to improve their effectiveness and
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efficiency by implementing some small changes in their working environment. They try to
invest in the automated expenses and bookings for minimising the cost and time which is
involved with the expenses of reconciling. The owners of the outsourcing businesses provide
an overview of the total expenditure which allows the organisation in establishing the clear
and perfect policies. Those implemented policies help the business to achieve success and
growth in various manners. It includes the various strategies to make the customers happy
and satisfied by saving the extra cost and time of the business (Gökalp, et. al., 2017). Having
regular meeting- This technique is also very useful in taking the business on top. Including
the regular hurdles or meetings with the workers and suppliers of the products and services,
helps in ensuring that are the customers are fully satisfied or not. It helps in checking the
effective use of resources for the betterment of the business. Managing the expenses of
staff – According to Snee, 2017), this technique gets includes in each and every corporate
sector which greatly helps in overseeing and managing the expenses of the employees. On the
other hand, it helps in pr, providing the highest information about management with quality.
Managing the expenses of the staff also helps the business to reach on its success level by
reducing the chances of loss and extra expenses from the business. Stay connected on the
moves- By the use of mobile, internet or flexible workings, it gets easier to understand that
all the employees are connected with their working or not. It helps in increasing the
efficiency of the business in such a great manner. As same it reduces the wastage of time and
risks of failure in a different manner. Some of the scanners and portable printers help the
employees of business outsourcing for working with better production (Snee, 2017). Using
time more efficiently- According to Grayson, et. al., 2017), the business of outsourcing
effectively focuses on using their time efficiently. As because the wastage of the time takes
the business into the situation of less production and services. The less production takes the
business into the situation of loss as because customers do not get their services on time,
which decrease their demands towards the organisation. They feel less interested in dealing
with the same organisation in future to meet their expectation. It affects the profitability and
success of the business in such a negative manner. So it is importantly required to take care of
the time, to work with effectiveness and efficiency as well (Grayson, et. al., 2017).
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Conclusion
It is concluded from the above description of outsourcing which is supporting tool to reduce
the burden and work load of business organisations. It provides several benefits to the
company such as saving the cost of company, more concentration on core business; it
improves the quality of products and services of company with the more satisfaction of
customers. Apart from that due to outsourcing the functions of company it also incurred
various disadvantages and there is a need to solve the issues.
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