NDLI: Managing Risks and Maintaining a Competitive Edge in Today's Outsourcing Environment

Content Provider	IEEE Xplore Digital Library
Author	Itkis, D. Arbak, J. Robar, H. Kennedy, E.
Copyright Year	2007
Description	Author affiliation: Portland State Univ., Portland (Itkis, D.; Arbak, J.; Robar, H.; Kennedy, E.)
Abstract	Summary form only given. In today's highly competitive market and rapidly changing economy, businesses must continually make choices if they are to survive, choices that set themselves apart from the pack. Consequently, some of the most important choices a company must make are strategic, and are the responsibility of Management. For this reason, taking into consideration the current business environment where the creation of value in the eyes of the customer and the shareholder is paramount, it is nearly impossible to survive without outsourcing some part of the business. In fact, manufacturing outsourcing is one area in particular, due to the competitive pressures, where very few companies can afford to ignore. However, outsourcing is not a risk-free adventure. Two of the most substantial risks that companies face when outsourcing to a manufacturing contractor is creating a competitor and counterfeiting. Thus, the objective of this research is to determine the risks companies have encountered when outsourcing their manufacturing specifically focusing on current academic literature, case studies, and empirical data, then propose a framework for evaluating and mitigating those risks. For decades, companies have been facing the challenge of finding the right balance of outsourcing and in- house development/manufacturing. It is commonly believed that the company should keep its core expertise in house, outsource the rest to remain competitive and watch its bottom line. However, when looking at the issue in greater depth, it becomes clear that this is an over simplification of the outsourcing dynamics. To give a few examples, what was not core competency yesterday, may become core competency a year or two down the road, so a vision and roadmap is a necessary part of core competency definition. The markets shift, companies launch new product lines, and decide to leave one business and enter another. To exemplify, outsourcing strategy needs to account for these dynamics as today's contract manufacturer may become the competitor very easily if the company decides to pursue vertical integration strategy. Moreover, it is easy to outsource a component that was developed in house, but without an effective feedback loop, the company may start loosing touch with what is feasible when developing the next overall design. In addition, the relationship, which started out as an exclusive agreement between the company and contract manufacturer (CM), dynamically changes if the contract manufacturer accepts a new client who is a competitor of the company. As a result, is the company better off outsourcing as much as possible to the most trustful contract manufacturer, or should it hedge its bets and outsource to many different CMs despite quality differentiation? Equally important, how will the company cope when the contract manufacturer decides to exit the business, or is subjected to an acquisition or merger? These and other questions present a formidable challenge to any enterprise this day and age.
Starting Page	1437
Ending Page	1450
File Size	4187338
Page Count	14
File Format	PDF
ISBN	9781890843151
DOI	10.1109/PICMET.2007.4349465
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2007-08-05
Publisher Place	USA
Access Restriction	Subscribed
Rights Holder	PICMET
Subject Keyword	Environmental management Risk management Outsourcing Manufacturing Companies Contracts Eyes Counterfeiting Watches Roads
Content Type	Text
Resource Type	Article

Sl.	Authority	Responsibilities	Communication Details
1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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