Outsourcing

Outsourcing is the practice of sending work to suppliers, rather than completing tasks internally. The main point behind outsourcing is to reduce costs. This can be achieved by sending work to suppliers that are located in lower-wage areas, or to suppliers that produce in very high volumes, and so can complete tasks at a lower cost per unit. Outsourcing is also useful when management wants to focus its attention on just a few core competency areas (such as product design), and has others deal with less-critical functions. Outsourcing may also be used when a company has proven to be incompetent or inefficient in certain areas, and management no longer wants to spend any resources correcting the underlying issues.

Functions that are commonly outsourced are payroll, manufacturing, and inbound customer service calls.