software outsourcing

A blog related to software development company and offshore software outsourcing

Thursday, October 05, 2006

Outsourcing in manufacturing industry

For a long time in manufacturing industry, focusing on the core business and outsourcing the rest has been one of the most central guidelines. At the time of starting the model-T Ford production by Henry Ford in the beginning of twentieth century, everything was manufactured in bulk and a large factory area that had iron core processing at one end and the other produces finished cars. Along with technological development, increasing clients’ needs and increase in number of competitor, the cars soon became more complex and need the continuous development of many technologies. Therefore the point came for the automotive manufacturers at which they had to make decision either to make or buy. They started with buying of more and more raw materials and parts from specialized suppliers. The Outsourcing trend concerned not just parts and materials.

Such organization have also increasingly do outsourcing for services, of which product development and logistical services has been the most important. Some suppliers, for example seat five manufacturers, started to deliver ready-made sub-assemblies directly to the automotive manufacturer’s assembly line. Some have total responsibility for the manufacturing and development of the entire system, for example braking systems and electrical harness. To enable efficient outsourcing process, the OEM-original equipment manufacturers have adopted modular techniques for product design. The end product has been divided into modules that could be outsourced & efficiently assembled in the original equipment manufacturers’ factory.

The role of Offshore Outsourcing has gone through certain number of change. According to a one study outsourcing had moved markedly from single performing functions to efficiently and reconfiguring processes with newer ways. Rather than asking what your organization can do, the question is why not going for Outsourcing process. The firm should do only those activities where they could develop best-in-world capabilities.

The trend is catalyzed by the better offerings from the Offshore Outsourcing service providers. They offer more flexibility, more value, with integrated services than any internal sources could offer. The relationship is becoming collaborative and strategic. Outsourcing service provider might take responsibility of a whole process; let us see one example for process of spare parts, including planning, then purchasing, inventory management, distribution, transportation and clients support. This will definitely reduce the number of third-party logistics providers that clients have to deal.

Now take a look at the retailing industry, we can not find an Outsourcing trend similar to manufacturing industry. Today, retailers are still trying to manage by themselves with ever-increasing range of products. The Offshore Outsourcing scope is confined to shipment and warehousing. There are certain examples that functions inside the retail store and concerning minor product categories, but it seems to be done without an outsourcing strategy.