Overview

It is feasible to state that the growth in several branches of the outsourcing field has been precipitated by the onslaught of globalization. As operating environments become more complex, companies are compelled to seek outside expertise that complements their own arsenals of human, physical and digital capital.

By definition, outsourcing implies the use of third parties to carry out functions that are not native to the "core competencies" of an organization. In today's market, outsourcing has come to incorporate the subcontracting of services and/or manufacturing activities and extends to payroll, information technology, logistics, light assembly and full-blown manufacturing, among other areas.

Theoretically, a company outsources non-core competencies so that limited resources can be focused on activities indigenous to its business model. In reality, outsourcing creates the potential to reduce costs at an operating level (less in direct payroll, for example), as well as improve the balance sheet by reducing the value of assets that are shown there (less in raw materials inventory through outsourced manufacturing, as another example). In each case, supply chain managers must analyze the true value of outsourcing within the confines of strategic and tactical initiatives, determining both the operational and financial consequences of any such undertaking.

Regardless of the motivation behind outsourcing and the varying opinions on its long-term future with supply chain management (SCM), its effect on global processes and communications in undeniable. Entire outsourcing industries have been born under the guise of strategic focus and functional expertise, with thousands of jobs and billions...