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Manufacturing and IT Outsourcing

Generally, companies go for outsourcing to be more cost-effective, or to gain access to skills that are not readily available within the confines of their enterprise. Summing it up, some companies seem to have the opinion that outsourcing could provide the needed resources they lack, and immediately, and that it would hurt less in the labor and manufacturing costs area. Actually, a lot of the reasons why outsourcing is gaining popularity go parallel with the various advantages that it provides.

Growth of Outsourcing
The on-going growth of the outsourcing industry is not an entirely new trend. As a matter of fact, it has been gradually increasing in size and number for several years now. Prior to the release of countless IT innovations, companies in urbanized countries have been accustomed to the term and practice of manufacturing outsourcing. They usually outsource manufacturing jobs to other developing nations nearby.

As a general rule, the system involves the outsourcing of jobs related to the manufacturing industry. A good number of companies also wind up building their own factory outlets out of the country, where the production materials are typically cheaper and labor costs are considerably lower. Canada, South Africa and Mexico are some of the countries that embrace this type of industry.

Manufacturing Outsourcing vs. IT Outsourcing
Despite the numerous semblance in terms, manufacturing and information technology outsourcing are two different areas of interest in the sense that they vary significantly in their relative pace and the additional overheads involved.

Manufacturing outsourcing was a fairly sluggish process that entailed the shifting of manufactured merchandise from the factory outlets in developing nations to their final destination. This scheme led to numerous job openings, especially in the transport sector. On the other hand, the IT sourcing industry failed to give rise to further work opportunities. This is mainly because of the fact that information is routinely exchanged by means of computers.

Product Manufacturing Outsourcing
The mass production of clothes and other garments in various Asian countries is a clear-cut example of manufacturing outsourcing. Companies from the United States typically outsource the manufacture of goods in nations that offer lower production costs.

Electronics – Microchips and other electronic parts are also candidates of manufacturing outsourcing. Giant electronic firms typically set up their own factories complete with the necessary technology needed for the production, as well as the packaging, of their goods.

Medical – Aside from the usual ready-to-wear apparels and microprocessors, the manufacturing industry also outsources various types of goods. One of which is the production of biomedical merchandise. As a matter of fact, it has become a widespread practice in numerous biotech firms, both big and small.

Outsourcing a wide array of tasks like regulatory filing, pre-clinical testing, and molecular genetics makes it possible for bigger companies to concentrate on their main transactions. In addition, it allows smaller firms to cut back on production processes that theyre not well equipped to carry out.

One such operation may include the creation of innovative drugs intended for clinical trials, which entails putting together a suitable facility. Needless to say, the monetary risk is notably great considering the fact that FDA approval has not been obtained yet.

As biotech firms take contractual or full-time consultants into service to supervise outsourcing operations and handle communications, the pervasiveness of manufacturing outsourcing has indeed created a new forte in the biomedical industry.

Coming across a highly regarded and dependable service provider necessitates the need to take a number of things into account. Aside from the expected overheads, concerns that surround the management of proprietary information, manufacturer site, contract validity, quality monitoring, level of outsourcing, communication issues and data storage should also be considered.

Indeed, an eclectic array of products could easily fall under the wide umbrella of manufacturing outsourcing, given that certain conditions are fulfilled. Then again, company owners need to view the issue from all corners so as to ensure that the advantages are far greater than the cons; otherwise, the losses could also be as enormous as the prospective gain.

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The Growth Of Outsourcing

These past few decades, outsourcing has gone through a lot of changes. From doing simple tasks and functions, service providers nowadays are given more serious and critical jobs related to the company. What used to be considered as a dreaded area to tread into, companies have become fond of offshore outsourcing instead of onshore outsourcing which proved to be more beneficial in terms of the relationship between money and quality. In offshore outsourcing, it has been observed that results yielded are of good quality but obtained at a lower cost.

Today, Business Process Outsourcing (BPO) is growing at an enormous rate. It encompasses back office functions being outsourced offshore. These functions include HR management services and accounting services.

Market Reports
The United Kingdom has overtaken United States to become the leading national market for new outsourcing contracts.UK represented over 37% of the US$16 billion market for major outsourcing contracts awarded worldwide so far this year, according to sourcing advisory firm TPI.

More than 660 multinational companies each bring business worth more than US$1 million (euro820,000) annually to India, where hourly software development rates range between US$18 (euro14.72) and US$26 (euro21.26), compared with onsite rates of US$55-US$65 (euro44.98-euro53.16) in the U.S. and Europe, according to The Associated Press.

The definition of outsourcing is to assign certain functions or processes of a business to a 3rd party organization that provides services related to that specific function. This is done by the virtue of an agreement manifested by a contract that indicates the terms of services which includes the scope and limitations. In this contract, the service provider gets to make use of the resources of the client company while the client company acquires the services from the provider company.

The Boom of the Outsourcing Industry
The rapid growth of the outsourcing industry would have not been possible if not for the rise of the Internet. The increase in Internet users has contributed so much in this industry. The boundaries that separated one nation from the other have been severed by the information superhighway thus making it easier for people to communicate with each other. A person from one side of the world can easily communicate with another person at the opposite side of the planet as if they are just next door neighbors.

With the whole world being wired together, it was very easy to transport jobs to people outside the main nation. And with the advantage of the difference in time zones, tasks and functions can be done on a 24-hour basis when outsourcing.

The Benefits of Outsourcing
1. One of the most important benefits of outsourcing is cost savings. By tapping into the lower cost economies, companies in industrialized nations can take advantage of the developing nations.

2. Outsourcing vendors are usually fee-for-service basis. This means that they are only paid when certain jobs or functions are done. This scheme is very beneficial for companies.

3. Companies become more flexible when it comes to making use of their resources especially in times of cyclical fluctuations.

4. The client company can focus and give more time to the core business activities. The burden of carrying other non-core functions will be handled by other 3rd party service providers.

5. Business process will be sped up due to the fact that certain functions will be taken care of specialists in that area. It is also not just about speed but with quality of work as well.

6. Errors and mistakes can easily be detected and can easily be fixed.

Given these benefits, the outsourcing industry will continue to grow in the future as major parts of businesses.