Tactical outsourcing

From CEOpedia | Management online

It is treated as a tool to solve various problems in company, concerning in particular: insufficient funds, insufficient decision-making powers in the implementation of the tasks, lack of access to modern methods and equipment, need to reduction in employment. As the authors point out tactical outsourcing is often used as a tool for the restructuring of the company. Main objectives of tactical outsourcing are:

  • cost reduction,
  • elimination of need to invest in resources used in the processes transferred to the service provider,
  • additional funds obtained as a result of sale of resources used so far to carry out the outsourced services,
  • reducing number of employees,

Highlighted effects of the application of tactical outsourcing do not include all ranges of benefits obtained by the company immediately after the beginning of the cooperation. However, they have been treated as essential, as they can eliminate various problems in the business. It is worth noting also the other benefits: The ability to use know-how of service provider, increase the degree of utilization of resources owned by the customer, increase the level of technical equipment. In terms of task performed it is possible to achieve a higher level of quality cooperation with suppliers and customers. Such processes may include logistics, IT services and marketing services.

Basis for cooperation with the service provider in tactical outsourcing is properly prepared agreement, in which specific provisions to ensure high quality of outsourced services at lower cost and with less involvement in monitoring. In this contract there are usually restrictions on freedom of company to creating specific objectives of the performed services. Often the assumptions about means of implementation of outsourced tasks, as well as the predicted effects are reflected in the relevant provisions in the agreement.

Examples of Tactical outsourcing

  • Reorganizing the production process - Many companies outsource production processes to reduce overhead costs and increase efficiency. This includes tasks such as manufacturing, assembly, packaging and distribution.
  • Outsource customer service - Companies may outsource customer service to reduce costs and improve customer service quality. Outsourcing customer service can also help companies provide round-the-clock support.
  • Outsourcing technical support - Companies may outsource technical support to reduce costs and ensure the availability of experienced technical personnel.
  • Optimize IT infrastructure - Companies may outsource IT infrastructure to reduce costs and ensure the availability of the latest technology. This includes tasks such as network and server setup, software installation, and data backup.
  • Developing new products - Companies may outsource product development to reduce costs and improve product quality. This includes tasks such as product design, engineering, prototyping, and testing.
  • Outsourcing marketing - Companies may outsource marketing activities, such as creating content, managing campaigns, and promoting products. This can help companies reach a larger audience and increase sales.

Advantages of Tactical outsourcing

Tactical outsourcing is a tool used to solve various problems in a company. It has several advantages, including:

  • Cost Savings: Tactical outsourcing helps reduce operational costs by using external providers to perform tasks that the company would otherwise have to pay for internally. This can result in savings in both labor costs and materials.
  • Efficiency: By outsourcing certain tasks, companies can focus on their core competencies while leaving the other tasks to a third-party. This can help the company become more efficient and increase productivity.
  • Access to Expertise: With tactical outsourcing, companies can access expertise that they would not otherwise have access to. This can help them access the latest technologies and processes, which can improve their overall performance.
  • Flexibility: Tactical outsourcing allows companies to be more agile, as they can quickly adapt to changes in the market or adjust to customer demands. This gives them an advantage when responding to changing conditions.
  • Risk Mitigation: By outsourcing certain tasks, companies can better manage risk and reduce the potential for losses. This can help them remain competitive in their industry.

Limitations of Tactical outsourcing

Tactical outsourcing can be a useful tool for companies in need of restructuring, but there are a few limitations to consider. These include:

  • Limited Cost Savings: While tactical outsourcing may be used to reduce costs, the savings may not be as significant as initially hoped. This is because there is often a limited range of services available, so the company will have to pay for any additional services that may be needed.
  • Limited Focus: Tactical outsourcing is only a short-term solution to a long-term problem. It cannot address strategic or structural issues that may be present within the company.
  • Limited Flexibility: Outsourcing can limit the company’s ability to make changes or adapt to changing market conditions. This can be a problem if the company needs to quickly respond to changes within its environment.
  • Risk of Incompetence: If the company chooses the wrong provider, it may be faced with an incompetent provider that is unable to deliver the services that were promised. This can cause delays and other disruptions to the company’s operations.

Other approaches related to Tactical outsourcing

  • Outsourcing of certain processes or activities: Tactical outsourcing can be used to outsource specific processes or activities to a third-party provider, allowing the company to focus on core competencies.
  • Offshoring services: Companies can use tactical outsourcing to offload certain services or activities to a third-party provider that is located outside of the country of origin. This approach can help to improve efficiency and cost while leveraging access to new markets.
  • Automation and technology: Tactical outsourcing also enables companies to leverage new technologies and automation to improve efficiency, reduce costs, and increase productivity.
  • Strategic partnerships: Companies can also use tactical outsourcing to form strategic partnerships with other companies to gain access to new resources, technology, and market opportunities.
  • Contract-based services: Companies can use tactical outsourcing to engage in contract-based services with third-party providers to help manage costs and take advantage of specific skills or resources.

In summary, tactical outsourcing is a tool used to restructure a company by outsourcing processes and activities, offshoring services, leveraging automation and technology, forming strategic partnerships, and engaging in contract-based services. This approach can help companies improve efficiency, reduce costs, and access new markets.

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