It is no secret that in today’s competitive business environment that corporations experience large amounts of pressure to maximize their operations by minimizing their costs. In order to do so, most companies turn to the three areas of global sourcing, that of shared services, outsourcing, and offshoring; the question becomes how these three different areas work to impact the profits of the organization, the people both of the organization and outside of it, and how they work to affect the overall planet, whether positively or negatively, in the short term or in the long term.
The fact of the matter is that “we live in a time of unprecedented change,” a time in which, in part as a result of globalization, a very real shift has started within the world of businesses and economies. It may be argued that due to the increased pressures of businesses to cut costs, and their turning to the areas of global sourcing as a means of attempting to rectify this situation, that a shift has transpired, one toward the developing, as opposed to the developed, world.
Global sourcing, the process by which a business turns to either outsourcing, offshoring, or shared services is seen as the newest approach to high levels of performance in supply chain management. In order to understand what this means, however, it is necessary to understand what each of these three different areas entails. A shared service is “centralized organizational unit that delivers services to multiple business units or functions in a consistent and standardized manner;” it was introduced in the 1980s for the purposes of assisting companies in reducing administrative costs associated with multiple business units. Outsourcing is the process by which a business opts to subcontract activities that are seen as non-core activities for the business to companies outside of the business for the purposes of decreasing costs, freeing up personnel, or decreasing the amount of time spent on certain activities; above all else it is used as a cost cutting tool. Offshoring, on the other hand, is a form of outsourcing, one that specifically refers to any outsourcing that is sent to another country, completed in the realm outside of the business’s home country.
Each of these different methods of global sourcing is utilized primarily as a method for a company to work to cut their total overhead costs, however it may also be utilized as a means of working to enter into the market of another country through the process of creating strategic alliances. Each of these practices are not positive or negative in and of themselves, though each may be positive or negative, or both, depending on the situation and the company implementing these strategies and the method of implementation. The issue arises when faced with the concept that not all businesses are concerned with making these global sources sustainable, a process by which the purchase of goods and services, regardless of the alternative method utilized to obtain them, takes into account the long term impacts that may be felt on profits, people, or the planet. Sourcing and procurement are the driving forces for a sustainable business. In working to review three specific case studies that work to utilize these different areas of global sourcing, it will be possible to gain a greater understanding of the different ways in which global sourcing may relate to people, profits, or the planet, and the different impacts that such actions may have on each of these three key areas.
To this end the following research question has been identified: “How do the three areas of global sourcing relate to profit, people, and the planet? The research objectives that will be addressed through the utilization of these case studies, for the purposes of addressing this question are as follows:
The concepts of global sourcing will be clearly defined, specifically those of outsourcing, offshoring, and shared services.
The areas of effect, people, profit, and the planet, will be clearly defined.
The correlation of outsourcing in context with the three areas of effect will be explored and analyzed, working to determine the specific interplay between the four.
The correlation of offshoring in the context of the three areas of effect will be explored and analyzed, working to determine the interplay between the four topics.
The correlation of shared service in the context of the three areas of effect will be explored and analyzed, working to determine the interplay between the four topics.
Analysis of these six areas will serve to provide a foundational basis for how these concerns should be addressed by businesses within our global society.
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- Kulhalli, S. 2010. A Structured Approach to Establishing Shared Services. [online] Available at: http://www.infosys.com