The decision to outsource a part of an organisation's activities is often the result of an initiative to realise potential production cost efficiencies. In order to avoid the use of such narrow decision criteria this paper considers the use of a wider array of inputs. Following a review of the literature, a composite outsourcing decision framework is presented. This framework consists of three main components. The first seeks to utilise the unique contextual factors associated with each decision; the second considers the strategic implications of deciding to outsource and the third investigates the traditional cost aspects. The framework is then applied to a case study concerning an engineering organisation which had to decide whether to outsource part of its production facilities. The outcomes suggest that the framework was a useful instrument in assisting management in making this decision, although further work in this area is required.
Management Decision – Emerald Publishing
Published: Feb 1, 2000
Keywords: Strategy; Transactional costs; Organizational structure
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