Respond to the following discussion on (Explain what factors would typically be considered in contingency planning in outsourcing arrangements). with or more word. Responses should be a minimum of 100 words and include direct questions.
1. How common is outsourcing? Its very common. More then 2/3 or 68% of the consumer product companies in the United States alone, outsource something within their company. With that much responsibility placed into another companies hands, a contingency plan has to be implemented. A contingency plan address and plans for the “what if” to happen. In my reading there was four factors that stood out to me when it comes to contingency planning. They are probability, what are the chances something is going to happen. Impact, if something happens, what type of issues could possibly arise from this. Order, in what order will the steps take place to implement and carryout the contingency plan. Risk mitigation,taking action to reduce the possibility of something happening.
A good company to use as an example for outsourcing would be Hershey Food Company. Their main raw material is cocoa. Cocoa is grown is warm climates, and Hershey gets the majority of their cocoa from West Africa. 70% of the worlds cocoa comes from here. Because of where they get their product from they have to plan for issues like political upset that would prevent them for getting their main product. They also have to plan for what if the crop is destroyed by weather or insects. As part of their plan, they are able to resort to getting cocoa from other locations like Ghana. Hershey also outsources some of there shipping and warehousing. Instead of owning their own fleet, or all of their warehouses, Hershey contracts trucking companies to transport their goods. They also pay for other companies to store their products. One thing about chocolate is it has to be stored and transported in temperature controlled environments. There contingency plan has to cover all the possibilities that could come from elevated temperatures.
If you were tasked with creating a contingency plan for transporting chocolate, what are some of the things you would take into consideration when coming up with your plan?
2. Outsourcing and offshoring can help a business become more lean and flexible. The practice can save money for the company while freeing up the company to focus on the aspects that they deem are important to the companys goals or value systems. when speaking of component manufacturing and services de Kluyver details that the two services can offer compelling strategic and financial advantages including lower cost, greater flexibility, enhanced expertise, greater discipline, and the freedom to focus on core business activities (de Kluyver, 2012).
As with all business strategies, there is risk associated. One of the biggest risks is that you lose that control of your business. No matter how much you share information you are not in control of the process. Things like customer service or goods being sent out are now out of your span of control. This is why it is important that you braced for this with a contingency plan. You need a contingency plan when it comes to the loss of control is making sure the company you outsource with shares the same value systems as you. When thinking about customer service, the outsourcing company has to have the same values as you because they are representing you as an intent.
One of the biggest ways to plan for a contingency when outsourcing is more outsourcing. Having one manufacture to outsource a product is not ideal when producing on a big scale. A company should split up outsourcing between outsourcing companies in case there is problems with one. This provides a readymade stopgap. It does have some limiting factors. One being that the company will not be able to immediately pick up the slack of two manufacturing companies. Also, the companies may have slight differences in the products they offer that may or may not be noticed to the consumer.
