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Essay / Outsourcing Case Study - 1192
Outsourcing relationships require the same care and attention to sound management principles and practices as do internal operations and valued employees. Good management enables continuous improvement, increasing value and constant innovation. Poorly managed, services and overall relationships deteriorate, leading to higher costs, operational disruptions and lost business opportunities. Financial savings resulting from lower international labor rates were the most important motivation for early outsourcing decisions. Offshoring, next offshoring, re-shoring and near-shoring are several strategies that will be discussed next as part of understanding a globalization strategy for a company. Offshoring is the strategy of outsourcing operations abroad, by companies from industrialized countries to less developed countries. Evaluation factors should be considered not only considering the current competitive environment, but also trying to envision the future business environment and how it might change. If the product or function is critical to a company's performance or is considered a core business, it is desirable to choose in-house capabilities. For example, if a product is time-sensitive or subject to frequent design changes, third-party manufacturing would likely be a mistake. A great example of an outsourcing mistake in this situation is the Boeing Company and the 787 Dreamliner project. But the decision to outsource tends to be a good choice when companies are trying to reduce the cost of capital or perhaps labor-intensive processes. Other reasons to consider outsourcing today are increased flexibility to adjust production in response to changing demand or access new process or network technologies or take advantage of outsourcing.