The Pros and Cons of Insourcing and Outsourcing in Procurement Decisions

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Kenyatta University *

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Business

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Nov 24, 2024

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docx

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The Pros and Cons of Insourcing and Outsourcing in Procurement Decisions One advantage of insourcing and outsourcing in procurement decisions is that companies can reduce costs. For example, Boeing saved money by outsourcing the production of parts for its 787 Dreamliner to suppliers in different countries. This allowed Boeing to focus on its core competencies and reduce production costs. The other advantage is that companies can access skilled labor and resources that they may not have in-house. For example, by outsourcing the production of parts to suppliers in different countries, Boeing was able to access skilled labor and resources that it would not have had if it had produced the parts itself. The other pro of insourcing and outsourcing in procurement decisions is that companies can reduce risks. By outsourcing the production of parts to different suppliers in different countries, Boeing was able to reduce the risk of parts shortages and delays in production. There are also some disadvantages to insourcing and outsourcing in procurement decisions. One disadvantage is that companies can lose control over the quality of their products. For example, when Boeing outsourced the production of parts for its 787 Dreamliner, it lost control over the quality of those parts, which led to problems with the aircraft. Another disadvantage is that companies can become reliant on their suppliers. For example, if a company outsources the production of a critical part of its product, and that supplier goes out of business, the company will be in trouble. Finally, it is important to consider the impact of outsourcing on employees. In many cases, outsourcing leads to job losses for employees of the company that is outsourcing the work. In the case of Boeing, they outsourced jobs to other countries, which meant that there were fewer jobs available for workers in the United States. Additionally, when companies outsource work,
they often do not provide the same benefits and protections to workers as they do for their own employees. This can lead to lower wages and fewer benefits for workers. The case of Boeing illustrates both the advantages and disadvantages of outsourcing in procurement decisions. It is therefore important for companies to weigh these factors carefully when making such decisions. In some cases, it may make sense to outsources parts or products, while in other cases it may make more sense to produce them in-house. Response to Student’s Post Hi, thanks for your insightful discussion post this week. I think the pros and cons of insourcing and outsourcing are pretty clear. I do not think there is a right or wrong answer, but each company needs to evaluate its own risks and benefits before making a decision. For some companies, outsourcing might be the best option, while insourcing for others might make more sense. I agree with the idea that outsourcing can increase the risk of loss of intellectual property, but this is something that can be mitigated with proper contracts and communication. In addition, increased flexibility and access to information are two strong advantages of outsourcing that should not be ignored. Ultimately, it is important for each company to evaluate its own needs and make the decision that is best for them. Thanks again for your thoughts.
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