Service Outsourcing
Service Outsourcing
Yong-Pin Zhou∗ and Z. Justin Ren†
February 2, 2010
Abstract
This article reviews the Operations Management (OM) research on service outsourcing, a common practice among today’s businesses. We focus on recent literature in three areas: capacity planning and supplier coordination, service outsourcing under information asymmetry, and quality concerns. Additionally, a mathematical framework is presented that can be used to analyze service outsourcing supply chains. We conclude with discussions on some promising future research areas.
1
Introduction
Globalization poses challenges to today’s businesses. To keep costs down, many business firms have turned to outsourcing. By definition, outsourcing refers to the act “to procure (as some goods or services needed by a business or organization) under contract with an outside supplier” (Merriam-Webster Dictionary). Almost any busineses processes can be outsourced: manufacturing, product design, procurement, customer care or other services (See article 4.5.5.3 for an in-depth discussion). Various benefits have been reported that fuel the outsourcing growth. Early outsourcing deals focus on cost savings (Johnson [17], Leavitt [21]), but as Kakabadse and Kakabadse [18] note, recently the goal of outsourcing has shifted from cost reduction to value creation. The value additions found by researchers have included: improved speed or quality of services
(Johnson [17]), access to outside talent, innovation, and new technology, strategic alliances with outsourcing partners (Johnson [17], Leavitt [21]), focus on core missions (Brown and Wilson [5]), and greater flexibility
(Johnson [17]). For a detailed discussion on advantages and disadvantages of outsourcing, please see article
4.5.5.2 of this book.
With information technology, many types of tasks that are traditionally performed in-house can now be outsourced (Karmarkar and Apte [19]). Indeed, not only is outsourcing here to stay, it is also set to grow.
Those
Yong-Pin Zhou∗ and Z. Justin Ren†
February 2, 2010
Abstract
This article reviews the Operations Management (OM) research on service outsourcing, a common practice among today’s businesses. We focus on recent literature in three areas: capacity planning and supplier coordination, service outsourcing under information asymmetry, and quality concerns. Additionally, a mathematical framework is presented that can be used to analyze service outsourcing supply chains. We conclude with discussions on some promising future research areas.
1
Introduction
Globalization poses challenges to today’s businesses. To keep costs down, many business firms have turned to outsourcing. By definition, outsourcing refers to the act “to procure (as some goods or services needed by a business or organization) under contract with an outside supplier” (Merriam-Webster Dictionary). Almost any busineses processes can be outsourced: manufacturing, product design, procurement, customer care or other services (See article 4.5.5.3 for an in-depth discussion). Various benefits have been reported that fuel the outsourcing growth. Early outsourcing deals focus on cost savings (Johnson [17], Leavitt [21]), but as Kakabadse and Kakabadse [18] note, recently the goal of outsourcing has shifted from cost reduction to value creation. The value additions found by researchers have included: improved speed or quality of services
(Johnson [17]), access to outside talent, innovation, and new technology, strategic alliances with outsourcing partners (Johnson [17], Leavitt [21]), focus on core missions (Brown and Wilson [5]), and greater flexibility
(Johnson [17]). For a detailed discussion on advantages and disadvantages of outsourcing, please see article
4.5.5.2 of this book.
With information technology, many types of tasks that are traditionally performed in-house can now be outsourced (Karmarkar and Apte [19]). Indeed, not only is outsourcing here to stay, it is also set to grow.
Those
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