The Advantages and Disadvantages of Outsourcing Project Management

In chapter 12, Outsourcing “Managing Interorganizational Relations” the text references some of the advantages and disadvantages of outsourcing project work. Below are the abbreviated points the text makes:

For the advantages they mention:

1. Cost reduction. Companies can secure competitive prices for contracted services,

especially if the work can be outsourced offshore.

2. Faster project completion. Not only can work be done more cheaply, but it can

also be done faster. Competitive pricing means more resources for the dollar.

For example, you can hire three Indian software engineers for the price of one

American software engineer.

3. High level of expertise. A high level of expertise and technology can be brought

to bear on the project. A company no longer has to keep up with technological

advances. Instead, it can focus on developing its core competencies and hire

firms with the know-how to work on relevant segments of the project.

4. Flexibility. Organizations are no longer constrained by their own resources but

can pursue a wide range of projects by combining their resources with talents

of other companies.

For the disadvantages they mention:

1. Coordination breakdowns. Coordination of professionals from different organizations

can be challenging, especially if the project work requires close collaboration

and mutual adjustment. Breakdowns are exacerbated by physical

separation with people working in different buildings, different cities, if not different


2. Loss of control. There is potential loss of control over the project. The core

team depends on other organizations that they have no direct authority over.

While long-term survival of participating organizations depends on performance,

a project may falter when one partner fails to deliver.

3. Conflict. Projects are more prone to interpersonal conflict since the different

participants do not share the same values, priorities, and culture. Trust, which

is essential to project success, can be difficult to forge when interactions are limited

and people come from different organizations.

4. Security issues. Depending on the nature of the project, trade and business secrets

may be revealed. This can be problematic if the contractor also works for

your competitor. Confidentiality is another concern and companies have to be

very careful when outsourcing processes like payroll, medical transcriptions,

and insurance information.

I liked the comparison and contrast of both the benefits and the costs of outsourcing. In my industry we have outsourced much of, if not all of, our IT support for network issues. I understand the company wanting to reduce cost and such, but there is the much bigger issue, the loss of our internal high level expertise. When we have network issues at our local plant database we have to go to our outsourced IT folks who hardly speak English and take two to three hours to resolve the problem, each time there is a problem. It frustrates me but I understand, why we use them. We want to focus on our core competencies, and IT is not one of them. Does your company use outsourcing? If so do you feel it helps your company focus on the issues they need to concentrate on enchaining?

Costco vs. Sams club: what is the advantage of whole sellers?

Is buying in bulk really more cost efficient? Yes and no. Whole sellers like Costco and Sam’s club sell their products in bulks to their customers.  Both Costco and Sam’s club give out the idea to the public that if they buy in bulk, they are saving money. This is not necessarily true. It depends on what you are buying.

For example, Produce is a “do not buy”  in bulks for obvious reasons of course.  How long would it last you? It would go bad and end up in the trash if you don’t use it up quick.  But frozen foods and meats are products that you should buy in bulks.  It is more cost efficient to buy them in large quantities and it will last you long.  The disadvantages of buying in bulk and being apart of the wholesale clubs is the annual membership fees. It also easy to get carried away and go over your budget when you are buying in bulk. Expired shelf life can also be a disadvantage. But despite the disadvantages, whole sellers manage to attract people to them. This is because of the savings in buying in large quantities and having to make less shopping trips, which overall saves you time and transportation costs. The savings are the main reason as to why Costco and Sam’s club are so successful.

Now whether Sam’s club is a better whole seller or Costco is the question. Each of them have different management techniques.

One of the critical decisions in Operations management is the location. Sam’s club is located in areas where people have to budget shop while Costco tends to be located in the wealthier suburbs. In terms of managing quality is concerned, Costco provides better quality   and less selection in their management techniques while Sam’s club offers more selection in their products but with lower quality.  Hence, why Sam’s club is a better place for most everyday necessities such as toilet paper and water bottles in which brand name does not matter. But, Costco is better for those looking for better brand names such as in clothing.  It is also proven that Sam’s club membership fee is cheaper than Costco’s. Costco pays their employees more and that actually effects the environment in the store. If the employees are getting paid well, they will have a better work environment with less stress; therefore providing better customer service.

Overall, I prefer Costco over Sam’s club. This is because of the excellent customer service they provide. Management is excellent at choosing their employees and providing a good environment. The greeting workers that provide samples of products during the shopping experience is a plus point for Costco. Although the membership may be a little more pricey then Sam’s club, the products at Costco are much better in quality which is more important to me.

Would you prefer to have a membership at Costco or Sams club and why? Overall, is it better to buy in bulks?