3. Brief History
• IT Outsourcing Contract Signed by Eastman Kodak in 1989.
• Chapter 1 of Outsourcing Launched
• Early 90’s saw Big Companies… in Big Trouble
• Characteristics of Chapter 1 of Outsourcing
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4. Industry Segments
• Service industry • Manufacturing industry
– Consulting – Production
– Legal – Purchasing
– Design – Logistics
– BPO and etc…
– KPO
– RPO
– Travel and Tourism
and etc…
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5. Cost Saving
The External Vendor work across corporate boundaries,
combine various production volumes of multiple clients,
maximize the utility of machines, labor, and capital, thereby
finally achieving the cost reduction.
Labor cost
Fixed Cost
Inventory
Capital Event
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6. Production Outsourcing
Advantages Dis- Advantages
Increased Flexibility Managerial Control Loss
Advantages Vendor Relationship
Core Competence Focus & Management Risks
Dis-
Reduced Risk Advantages Internal Talent Loss
Is Production Outsourcing Good?
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7. Termination
Negotiations or
Renewal
Contract Contract
Finalization Finalization
Supplier
Competition
Supplier
Proposal Transition
Transformation Execution of
Outsourcing
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8. Purchasing
“Purchasing refers to a business or Organization
attempting to acquire goods or services to accomplish the
goals of the enterprise”.
- National Purchasing Institute
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9. Advantage of Outsourcing
Reduce Costs,
Improve Share Risks &
Raw Material
Quality and Stop product
Purchasing
Optimize Duplication
Operations
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10. Disadvantages of Outsourcing
Government Transportation
Loosing Currency
Mandated time, cost and
Managerial Hidden Cost Value
Regulations, custom
Control differences
Duties & Tariff requirements
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11. Purchasing
Are we sourcing the
right part of the
product?
Quality and Total PRODUCT
Cost Checking
LOCATION
PROCESS
The Absolute
direct cost isn’t
always the best
thing to do
Special Consideration when Outsourcing Purchasing
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12. Why Outsourcing?
When Outsourcing?
When a Partner could provide a capability more effectively than the
company could itself.
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13. How?
• Identifying Core Components of Business
• Identifying Economies of Scale
• Identifying the implications of No Loss of Quality” due to Long
Distance Sourcing
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14. Purchasing
Proprietary nature of process or function
Not High Priority
proprietary
Strong Outsourcing
Candidates
Medium Priority
Data is Outsourcing opportunities
proprietary dependent of industry and
company dynamics
Profit model is Low Priority
proprietary Captive Sourcing
Candidates
Unique to sell Common
across
Uniqueness of business process or function Industries
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15. Logistics Outsourcing
• Definition
• Why 3 PL has Grown
– Greater Complexity
– Shorter Cycle Time
– Latest Logistics Technology
• Types of 3PL
– Standard 3PL provider
– Service Developer
– Customer Developer
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16. Logistics Outsourcing
• When should 3PL be Used?
• Disadvantages
How to do Logistics Outsourcing
Evaluate Corporate Strategy Request for Proposal (RFP)
Identify Hidden Costs Understanding 3PL Providers
Identify company’s Existing Measurement
Resources
Recognize Timeframe
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17. Service Outsourcing
“If you don’t do it,
You won’t live to compete”
- Vick Gandhi
CEO & Founder of BeachCherry
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18. Advantage of Service Outsourcing/ Offshoring
Reduce & Control The Operating cost.
Gain Access to World-Class Capabilities
Free Internal Resources for Other Purposes.
Gain Access to Preempt Resources.
Reduces & Help Transfer Risks.
Handle Concentrate on Core Functions.
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19. Disadvantages of Service Outsourcing/ Off-shoring
Operational Risks
• Risk show up as Slippages on Time, Cost & Quality.
Strategic Risks
• Risks are rooted in deliberate, opportunistic behavior by service providers or
their employees.
Composite Risks
• Risks are when a client company has outsourced a process for so long that
it can no longer implement the process for itself.
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20. Total Cost of Outsourcing
Cost Paid to
provider (CPP)
Additional Buyer
Costs (Expenses
for a successful
TCO = CPP + ABC + PAC
Project) – (ABC)
Performance
Associated Costs
(Quality reliability
etc.) – (PAC)
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21. 5 Practices for Better Outsourcing
Go offshore for the right reason
Choose Outsourcing Model carefully
Get People On Board
Need to Invest Time and Effort
Treating off-shore partner as Equal
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24. CONSTRAINTS WEB 2.0
Change
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25. 9 Critical Chapters – Outsourcing Shifts
From To
Limited Access Virtually unlimited access to collective wisdom and market intelligence
Procurement Relationship management as the Holy Grail
Process People as the center of the outsourcing universe
Mostly closed IP Mostly open IP/ more sharing
Low Price Best value
Static Dynamic, Actionable, Interactive Content and IP & Data
Hunting Shopping
Betting Investing
Medication Gratification
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26. Effect of World Oil Price on Outsourcing
• Constant Rise in World Oil prices since 2004
• Price Pushing Towards $ 150 a barrel
• Effects of World Oil on Companies Bottom Lines
• Countries Where Outsourcing is headed
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27. How can BeachCherry help you?
• Always Open
• 30 different languages.
• Have worldwide presence overnight.
• Only 1 department of importance – Sales.
• Grow your Sales Team – Leave the rest to
us.
• Over all Operation Cost reduced by 35%
average.
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28. Live Small, Think BiG
• Large Corporations (Fortune 5000) outsource many of their departments
Tele-Communication Pharmaceutical
Finance Information Technology
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