Outsourcing is the process of choosing a company to handle our day to day mundane operations so that the company can focus on core activities or to enjoy the benefits of lower labor costs in different countries. As any method ,outsourcing has many benefits and risks. One of the risk of outsourcing is increased costs.
Outsourcing would result in increased costs when :
1. It takes longer time to be able to match the desired quality of the product or service,until the defect ratio is lowered.
2. Costs also may increase if it takes a lengthy route to get the product delivered to the warehouse or ultimate consumer, related to logistics costs.
3. Cost associated with risks like severance ,spillage etc also increase with outsourcing.
These are some of the instances which contribute to increasing costs as a result of outsourcing.
Explain increased costs as a risk of Outsourcing in Management Purchasing and Supply chain
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