Back to reality Essay Example | Topics and Well Written Essays - 2250 words

Back to reality - Essay Example 2) Potential problems and issues in developing sourcing strategies The essence of outsourcing for any given organization is to lower the costs involved in executing the outsourced functions. This is because; the practice is associated with minimizing costs, based on the fact that it does not involve direct hiring of employees by an organization (CIPS, 2012 n.p.). Thus, through contracting for the provision of such services, an organization passes on the responsibility of hiring and retaining staffs to the contracted firm. This strategy has however proved to be more costly than it was anticipated. After a thorough scrutiny of the costs involved in this strategy, it was observed that, despite the fact that the federal employees are highly paid, the US government paid the contractors 1.83 times higher than its employees on average (Williams, 2012 n.p.). Thus, the strategy has proved to be a cost incurrence affair in the guise of cost minimization. This is because; outsourcing for contra ctors to offer services on behalf of an organization results to three elements of costs minimization, which may work to the disadvantage of the organization. First, to save on their costs incurrence and improve their profitability, the firms contracted by an organization embarks on the cost minimizing strategy by reducing quality or resource utilization. Therefore, they may reduce the number of staff they hire, to minimize their expenditure, which on the other hand results to poor service delivery to the organization’s customers (Brown & Wilson, 2012 p58). Secondly, a firm can minimize its costs by transfer savings, where the firm engages in hiring employees at a lower cost, through paying them less. However, the problem associated with this concept is that employee protection shields the employees against such practices, which would mean that the firm might be forced to hire employees of a lower caliber, who might not have the expertise, skills and experiences desired by the organization outsourcing the services (McGovern & Quelch, 2005 p19). Alternatively, the firm offering the outsourced services can minimize its costs through efficiency savings, which involves the use of highly qualified staffs, better work processes and equipments, and high technology usage (Compton & Jessop, 2001 p40). Nevertheless, to achieve efficiency saving, there are other costs involved before the economies of scale is attained. Therefore, in a nutshell, outsourcing of suppliers and contractors is no longer a cost saving strategy. As it turns out, outsourcing has become a costly affair for the organizations involved, prompting the need to revert into in-sourcing and back-sourcing (Emmett & Crocker, 2006 p22). 3) Potential problems and issues in relationship with key suppliers There are potential problems that can be experienced with key suppliers in the outsourcing markets. First, the issue of different expectations between the supplier and the outsourcing company can result to a failed business relationship. The expectations of the supplier and the outsourcing organization should tally, to ensure that the supplier offers services to the customers of the organization, as expected by the organiza