The purpose of our thesis is to determine the factors that impacting the clients satisfaction on outsourcing. The importance of Supply Chain Management (SCM) has been a essential part of a company; however, a well SCM is much less older as some old function like Human being Connection Management, Accounting, etc. Thus, companies may outsource SCM or particular function among SCM to the 3rd party services service provider.
Meanwhile, the quality and influence on outsourcing would be a matter to companies. Customers make the sales, profit of any company. In case the part which being outsourced may contact customers immediately, is there any precaution and way of measuring to guarantee the services provide will never be impacting during outsourcing, or how to reduce the impact to companies.
Today's Supply Chain Management
Many companies today are strengthening their connections with partners all over the supply chain. They no longer just treat suppliers as vendors and vendors as customers. They treat both as lovers in providing customers value. Most business nowadays are customer-oriented, e. g. , Sales, CS & Business, Insurance, Bank/Finance, Beauty Good care/Health, etc.
Background of Outsourcing
In a global marketplace an increasingly huge competition makes companies striving to find strategies that give them competitive gain over the rivals (Christopher, M. , 1998). Outsourcing has been cured as one of the main business and financial concepts for attaining competitive advantages.
Outsourcing can be explained as "the transfer of the production of goods or services that had been performed internally for an external get together" (Van Weele, A. , 2005). Company can concentrate on their main business if the firms transfer its operations to some other company to produce goods or services some third party services service provider.
The basic reason behind outsourcing is the increased pattern of globalization (Enarsson, L. , 2008, p. 33). The reason why behind outsourcing may lower the price on delivery, utilize local firm's resources thus avoid capital investment on permanent asset for growing non core products, also to gain access technology, performance through effective collaboration.
Problems discussion
Outsourcing, regardless a robust economical and business strategy, will not always ensure success to the outsourcesr involved with the entire process. There are various disadvantages in outsourcing functions. It might help a business on cost saving, focus on core business; enhance convenience of advancement, wider experience and knowledge, etc. However, there are a few arguments on guaranteeing quality of service, certification of outsourcee, standpoint of labor.
Once a firm determined which projects will be outsourced, they have to know why outsource and when to be carry out, how to prevent from mistakes while outsourcing.
CONCEPTUAL STUDIES
In this part we will explain the concept of supply string management and outsourcing as well as their marriage from the idea of view of different available and established ideas and literatures. In this particular section our goal is to sophisticated more about outsourcing in a theoretical frame.
Supply Chain Management (SCM)
A customer centered definition is distributed by Hines "Supply string strategies need a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the buyer. As a result costs must be lowered throughout the string by traveling out pointless costs and concentrating attention on adding value. Throughput efficiency must be increased, bottlenecks removed and performance way of measuring must focus on total systems efficiency and equitable compensation distribution to people in the source string adding value. The source chain system must be attentive to customer requirements. "
SCM describles a longer channel, stretching out from raw materials to components to last products to final buyers. To put into action an efficiency and effective supply string systems take lots of time to design and manage, therefore many companies nowadays decided to outsource parts of logistic function to a third party services provider. Then they can allocate more source of information and pay more work on their central business.
The Tendency of Outsourcing
There are no constrains to any functions which is often outsourced or never to be outsourced. To improve the levels of competition, many organizations have started to consider in producing and maintaining the range of expertise and skills needed to contend effectively. This need has led many companies to engage with various kinds of sourcing; like outsourcing (Oshri, I. , Kotlarsky, J. , & Willcocks, L. P. , 2009)
Definition of Outsourcing
Different writers have described the outsourcing that addresses a wide scope of the idea of outsourcing. The term of "outsourcing" can be separated as "out" and "source" which means sourcing externally. Some simple meanings of outsourcing receive as follows
". . . contracting with a third company for the management and conclusion of a certain amount of work, for a specific length of time, cost, and level of service. . . " (Oshri, I. , Kotlarsky, J. , & Willcocks, L. P. , 2009, p 4)
"A deal is the means where the planning, responsibility, knowledge, and supervision of functions is transferred to an external get together" (McCarthy & Anagnostou, 2004, Blumberg, 1998)
According to Franceschini, F. et al. , 2003, Outsourcing is a managerial strategy usually used for delegating the responsibility to an exterior source to carry out the procedure of production process or services of your enterprise.
In these contexts, it can be summarized that, outsourcing is an arrangement between buyer and supplier(s) to avail functions or services that the buyer offers internally at present; with an goal to lessen cost, increase give attention to main business, improve quality of products and services and ensure more flexibility.
Evaluation Process for Outsourcing
An organization needs to maintain an functional cycle to execute the outsourcing operation. There will be the outsourcing life cycle brought up by M. J. , Desouza, K. C. , & Bonifazi, C. (Source: Ability, M. J. , Desouza, K. C. , & Bonifazi, C. , 2006)
Strategic evaluation - As the first level of the outsourcing process, strategic assessment is the crucial activity in the complete life pattern of outsourcing. The organization should identifie a certain business case and assesses the benefit of implementing the outsourcing as a technique.
Needs examination - After conclusion of the proper assessment, the next phase for the organization is to determine the needs plus more specifically regions of the needs that are would have to be centered on.
Vendor assessment - Organization goes for soliciting, evaluating and choosing the vendor because of its outsourcing needs.
Contract and negotiation management - To become engaged in discussions (and renegotiations) until an arrangement is reached about the details of outsourcing work.
Project initiation and move - This is the most influential stages of the outsourcing romance. The client business slowly starts to hand within the control of the task to the outsourcee. Outsourcer should always focus on package with emergent issues and erase any problems that occur. This stage marks the foundation of the continuing relationship.
Relationship management - To maintain currently with the outsourcing relationship
Continuance changes or leave strategy - Group must evaluate its current outsourcing deal to see if its best interest lies in continuing, modifying or exiting the partnership.
Motives for Outsourcing
Cost Efficiencies:
Cost lowering has been the prime purpose for outsourcing (Ford, D. , et al. , 1993). To develop a total product is always expensive for a firm as it requires huge investment to boost products and development process through continuous research and technology development. Outsourcing techniques reduces the expense of the client company in this area as the providers spend money on this area to meet the demand of the potential buyers in a big scale. In this manner, a company can perform the competitive advantages in the market reducing the price through outsourcing process.
Focus on Core Business:
Every company has some activities that aren't as essential when compared with its main business functions. By sourcing non-core business activities a firm can give attention to its core business in an improved way. So, the efficiency of an company is likely to increase as more time and resources are focused only on the main business functions (Davis, J. , 2002).
In addition, there are a few other driving a car factors that encourage the buyer company to adopt the outsourcing strategy. Such as operational expertise, enhance the capacity for development, capacity management where the risk in providing the excess capacity is borne by the company.
EMPIRICAL STUDIES
IKEA Hong Kong's Strategy and History
They offers a wide range of well-designed, practical home furnishing products at prices so low that as many folks as possible can afford them. This is actually the idea at the central of everything IKEA will, from product development and acquisitions to how they sell their products in retail stores.
IKEA can make a good-quality product for a higher price, or a poor-quality product for a minimal price. But to make good products at low prices, they have to develop methods that are both cost-effective and innovative. It has been the concentration of IKEA since its origins in Smland, Sweden. Maximizing the utilization of recycleables and production adaptation to meet people's needs and preferences has designed that their costs are low. The IKEA way to do things is to go away these cost benefits on to customers.
Importance of Select Reliable Outsourcee
Under our inspection, IKEA Hong Kong has outsourced the house delivery and assemblage services to an independent contractor. In essence, with go back or exchange, home delivery and assemblage services would be the final level for company to provide services to customers. From placing your order to delivery, IKEA needs at least three workings, even the staff give excellent customer services at retails store, the experience waiting for you almost diminish out after inserting order. As the period from holding out order delivery to complete can replace the experience in store, services provide during these period of time is essential to choose will this customer return or not.
No customers, no business, no sales. Those satisfied ones turns to be a loyal customers, normally, unsatisfied customers will bad month our company. Person to person is a reference to the passage of information from individual to individual. The effect of person to person is not measurable and difficult to restore company image.
The sizes of stability; responsiveness; confidence; empathy; tangibility and cost in the service quality way can be utilized in discovering critical factors that could suggest ideas on selection of logistic services service provider (LSP) (Kong & Mayo, 1993; Bienstock, et al. , 1997).
Reliability
Responsiveness
Assurance
Transit time
Service Consistency
Document
Accuracy
Variety of Services
Express Delivery
Global coverage
Updated rates
Track and Trace
Containerization
Consolidation
Reputation
No Goods Damages
Empathy
Tangibility
Cost
CRM
Employee
Courtesy
Location
Modern Equipments
Own CFS
E-services
EDI
Price
Discount
Credit term
Case Analysis I: Apple Computer and TNT Express (See Appendix I)
Apple Computer has been outsourced its delivery services to TNT Exhibit. There would be a list of complaint about the services of TNT Express. The claims are regarding to deal missing, long delivery time, with recomfirm to package deal receiver.
FINDINGS
Apple Computer outsourcing its delivery services to TNT, everyone who place the order from Apple store understood this. Once the order is placed, there are an implication of customers are agreed to let TNT Exhibit to dominate the duty of product delivery.
Unlike IKEA Hong Kong, the delivery materials of companies like trucks, bins are imprinted in IKEA emblem. It is problematic for customer to recognize they aren't the staff of IKEA. In order to protect the image or reputation, IKEA should ensure the contractor can perform like an IKEA staff, i. e. , the delivery employee should have basic product knowledge, especially for handling the enquiries through the procedure for services delivery. That's unreasonable to state "we are contractor alternatively than direct staff of IKEA".
Customer service is any contact between a customer and an organization, which can cause a negative or positive perception by a person during services delivery. As an outsourcer, they could state clear of marriage between outsourcer and outsourcee may reduce grievances caused by misunderstanding.
The case of Apple, sometimes online verifying system of TNT Exhibit will not show the genuine product delivery status. Those complainers about product delivery have focus on the assistance provider - TNT Exhibit instead of complaining the Apple's decision making on contractor selection.
Case Study II: Review on Outsourcing of Federal government Activities on 2002 and 2004 (See Appendix II)
The Efficiency Unit of HKSAR has been conducted a study about outsourcing of governemt activities as at 2002 and 2004 since 2000. With this two records, it demonstrated, over 80% of bureaux and departments have beed outsourced at least one function to the indepentend company.
FINDINGS
According to the report on 2004, those functions which occupied the most expenditure were capital works & constraction, building & property management and environmental hygiene will be the top three outsourced functions.
By examining the pattern of annual costs, the fluctuation of transfer services is the most serious one of the listed functions. The percentage of reducing expenditure is the most significant as well. In 2000, the costs was around $1 billion and then it slipped to $0. 1 billion in 2002. Unlike other services categories, transportation services were doubling the expenses on 2004.
The emphasis of outsourced function of IKEA Hong Kong is the delivery services, it may categorize as transportation services among the government functions. Mention of the expenditure on different services categories, carry services it is did not donminated the propular function of being outsourced.
Reference to the webpage 6 of study on 2004, there are current satisfaction of outsourcee's performance. Around one half of the outsourcee full fulfilled the requirement of outsourcer. Yet addititionally there is another 50 % that only partly fulfill.
CONCLUSION
IKEA is now the world's largest furniture retailer; they have a fixed group of partners on creation, purchasing and supply functions, design and development of products in the IKEA range. For circulation they have their own logistics center Europe is situated in Dortmund, Germany and Asian logistic centre is found in Singapore along with its IT bottom. To retaining customers, they have got the customer relationship system of IKEA Family.
IKEA succeed in European countries no matter for SCM, marketing and customer retention. In Hong Kong region, there is also a good SCM, even they outsourced parts of service to an unbiased services provide. Yet the seldom to listen to so negative comment to the people outsourced services.
Furthermore, under our analysis, we discovered that only one contractor overran the job of delivery, set up services. The part that would appreciate is even the delivery services are being outsourced, IKEA Hong Kong still using a backup delivery term in-house. Once there are any conflicts or under peak seasons of placing your order, IKEA may take over area of the order themselves.
However, it is difficult to understand why they have got not establish the loyalty cards in Hong Kong. To power the loyalty of customer, which is important to understand the purchase pattern of customers, in order to provide related advertising and information to encourage them repeating purchase.
There are no absolute anwser for good to be outsoure or not to be. Companies should choose a planned way towards outsourcing taking into account the passions of employees and customers alike and think of a balanced move forward.
The cycle of analysis process for outsourcing is a good model for a firm which would fascination with outsourcing a/some particular function to a 3rd party services company.
For those companies which have been outsourced, a regular evaluation on before and after outsourcing is important. In the current dynamic current market, there are no rules can last till the finish. The one who wants to be dominating of the marketplace, they ought to keep record on of market tendency, find out the competitive edge and possessing a periodical review company's performance every once in awhile.
APPENDICE
http://conversations. apple. com/thread. jspa?threadID=2537721&start=0&tstart=0
APPENDICE
http://www. complaintsboard. com/complaints/tnt-shipping-c41785. html
APPENDICE
Some links of issue about TNT Express when overtaking the order from Apple Computer.
http://www. uwants. com/archiver/?tid-10549683. html
(a brief survey maintain by some discussion board members)
http://www1. 17t17p. com/viewthread. php?tid=452427
http://boardreader. com/thread/Apple_HK_TNT_FRUSTRATION_9udfX1jc6j. html
http://discussions. info. apple. com/click. jspa?searchID=-1&messageID=12054701
