What are the advantages of outsourcing noncritical and somet

What are the advantages of outsourcing non-critical, and sometimes even critical, value chain activities?

Solution

In principle, every functional or value-adding activity, from research to manufacturing to customer service, is a candidate for outsourcing. It is hard to imagine, however, that operationally excellent companies would consider outsourcing activities that are critical to the efficacy of their supply chain. Similarly, companies operating with a customer-intimate business model should be reluctant to outsource customer-service-related functions, while product leaders should nurture their capacity to innovate. That is why Toyota made continuous investments in its production system as it globalized its operations, Procter & Gamble focused on strengthening its world-class innovation and marketing capabilities as it expanded abroad, and Wal-Mart continued to refine its supply-chain management capabilities.