Operations management

Table of Contents

1. Topic pack - Operations management - introduction
2. Operations Management (OM) - Introduction
3. 5.1 Production methods notes
4. 5.1 Production methods - questions
5. 5.2 Costs and revenues - notes
6. 5.2 Costs and revenues - questions
7. 5.3 Break-even analysis - notes
8. 5.3 Break-even analysis - questions
9. 5.3 Break-even analysis - simulations and activities
10. 5.4 Quality assurance - notes
11. 5.4 Quality assurance - questions and activities
12. 5.5 Location - notes
13. Innovation - notes (HL only)
14. 5.6 Innovation - questions
15. 5.7 Production planning - notes
    1. Production planning
    2. The nature of stock
    3. The purpose of Stock Control
    4. Just-in-case (JIC) and just-in-time (JIT)
    5. Traditional approaches to stock control
    6. Preparing the Stock control Diagram
    7. Impact of errors
    8. The Toyota Production System
    9. Capacity Utilisation
    10. Outsourcing and sub-contracting
    11. Case study - The Call Centre Industry
    12. Outsourcing
    13. Make or buy decisions
    14. Case study - Half Moon Bay police
16. 5.7 Production planning - questions
17. 5.8 Project management - notes (HL only)
18. 5.8 Project management - questions (HL only)
19. Print View

Outsourcing and sub-contracting

As markets become ever more competitive and global, firms are looking for ways to gain that 'extra edge'. Naturally, selling more products must be the main focus for any business, but increasingly it is the cost base of a firm that is receiving the greatest attention. If costs are lowered, the firm will have several choices. They can reduce prices and gain market share; they can retain price levels and make a larger profit margin, or of course, they may combine the two benefits.

One focus for cost reduction is the activities that a firm undertakes. Some of these activities are core to the firm's operations. In most cases the actual marketing of the product or service fits into this category. Some other activities, particular routine, and /or repetitive features are necessary, but the skills required might not be specific to the firm, nor skills, which they possess in great depth. Increasingly firms are asking the question whether they can outsource some of their operations, so they can focus on a limited number of key operations. An increasing range of activities, including IT services, training, payroll and public relations are now being outsourced. One area that has particularly been the object of outsourcing has been call-centre services, which over many years have increasingly been located in lower wage areas such as India and Latin America. These jobs are handled by separate companies that specialise in each service, and are often located overseas.

The specialised company that handles the outsourced work is often streamlined with world-class capabilities and access to new technology that the outsourcing business could not afford to buy on their own.