TOPIC : SUBCONTRACTING OBJECTIVE : In lesson : to understand what SUBCONTRACTING is, and to be able to analyze its usefulness

3 important ways in which modern firms are beginning to re-organise the exact location of where certain tasks are performed

The practise of using another business to do part of your work : usually non-core activities aka subcontracting Outsourcing activities to a firm outside your home borders Reversing the outsourcing decision and start performing those activities internally again (a.k.a. Reshoring)

“DESIGNED IN CALIFORNIA, ASSEMBLED IN CHINA”

Our ‘core competency’ is software design. We hire highly skilled employees and design world beating software. Although obviously our software needs hardware – we don’t really have expertise in manufacturing, its not really our thing – the Chinese do that kind of thing well. They can do our manufacturing for us. Although obviously we want to offer after-sales assistance to our customers – we don’t really have any desire to run Call Centres. We don’t have any expertise in that – the Indians do that well. They can do our customer service for us.

OUTSOURCING ADVANTAGES [1] REDUCED COSTS. Labour is cheaper, Host governments offer incentives [2] INCREASED EXPERTISE. Either gained form external sources, or developed as internal workers can now fully focus on core activities DISADVANTAGES [1] DEPENDENCY ON SUPPLIER. Which means less autonomy for the firm [2] LOSS OF FULL QUALITY CONTROL [3] BRAND DILUTION.

THERE IS A COMEDY [CALLED ‘OUTSOURCED’] ABOUT A CATALOGUE FIRM THAT SELLS NOVELTY GIFTS [‘MID AMERICA NOVELTIES’] THAT SHUTS ITS U.S. SALES OFFICE TO SET UP IN INDIA. HERE IS THE TRAILER SATIRICAL TV NEWS SHOW SUGGESTS IF THE OUTSOURCING TRENDS CONTINUES THEN IT COULD LEAD TO THIS….

AN INTERESTING SHARK TANK PITCH [LOLLACUP] IN WHICH THE QUESTION OF WHERE TO PRODUCE COMES UP

So going back to ínhousing’- what is it and why do firms do it The vague answer is – its reversing the outsourcing decision and its done because the disadvantages of outsourcing have begun to outweigh the advantages.

Just checking! What is subcontracting - And why is it done?