Outsourcing vs. Insourcing: Advantages, Disadvantages, and Analysis

This essay provides a comparative analysis of outsourcing and insourcing strategies adopted by organizations worldwide. Outsourcing involves manufacturing product components in different countries and assembling them elsewhere, while insourcing entails performing business operat...Read More

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OUTSOURCING VS INSOURCING
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OUTSOURCING VS INSOURCING
Companies all over the world have concentrated outsourcing the goods and services to
different countries. However, certain businesses have adopted the concept of insourcing in
recent times. This essay will discuss about the course reversal and which concept is more
favorable for the organization.
Outsourcing is the practice that an organization adopts where the different parts of the
product are manufactured in other countries and then they are assembled into another location
(Schniederjans, Schniederjans & Schniederjans, 2015). Whereas, insourcing is when the
organization performs any kind of business operation internally, by either hiring a third party
who performs the task internally or by doing the task themselves (Jackson, 2013). This was
done by organization to cute back in the cost of transportation, labor and taxes. Even though
the main driver of an organization is to cut back on the extra costs, however, outsourcing still
remains a favorable practice in several organization due to its various advantages. Firstly, the
company can better quality goods and services if the task is done by an individual who
expertise in the said job. Secondly, outsourcing can help the organization to concentrate on
the core business activities if the other tasks are outsourced to capable people. Thirdly, any
kind of risk is shared by the partners to whom the organization have outsourced their work
which reduces the burden of risk to a great extent. Fourthly, if a task is outsourced then the
workload of the in-house employees are reduced and hence the organization can use the
employees more efficiently. Fifthly, if an organization in the United States outsources their
task to a country like India which operates on a different time zone, then the organization has
an added advantage of completely using their 24 hours (Oshri, Kotlarsky & Willcocks, 2015).
The outsourcing partner can take over their work when their time of the day ends and send it
back for any kind of review the next day when they start their operation. Lastly, when the
outsourcing is done to an expert partner then the production quality will be much higher and

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hence the satisfaction of the customers will be high resulting in the good promotion of the
company (Schwörer, 2013).
Insourcing, on the other hand, can be unfavorable for an organization due to its
various disadvantages. Firstly, insourcing requires a huge investment in terms of equipment
and other raw materials which would be need to complete the required tasks. Secondly, the
company will suffer various costs which might be not useful for them in case of equipment
(Stentoft, Mikkelsen & Johnsen, 2015). This is because there might be certain equipment
which might not be needed more than once and hence it will be a waste after one use. Lastly,
there might be problems in the supply chain integration as in a normal supply chain there are
many parties involved and problems might arise when a decision needs to be taken.
Hence, it can be said that even though outsourcing might seem like a much easier
option for organization as the task is done internally, outsourcing is a much more efficient
option and more cost effective.

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References:
Jackson, J. K. (2013). Outsourcing and insourcing jobs in the US economy: Evidence based
on foreign investment data.
Oshri, I., Kotlarsky, J., & Willcocks, L. P. (2015). The Handbook of Global Outsourcing and
Offshoring 3rd Edition. Springer.
Schniederjans, M. J., Schniederjans, A. M., & Schniederjans, D. G. (2015). Outsourcing and
insourcing in an international context. Routledge.
Schwörer, T. (2013). Offshoring, domestic outsourcing and productivity: evidence for a
number of European countries. Review of World Economics, 149(1), 131-149.
Stentoft, J., Mikkelsen, Stentoft, J., Mikkelsen, O. S., & Johnsen, T. E. (2015, January).
Going local: a trend towards insourcing of production?. In Supply Chain Forum: An
International Journal(Vol. 16, No. 1, pp. 2-13). Taylor & Francis.