Outsourcing – disadvantages and advantages
• Outsourcing involves taking to market those internal business processes and activities that can be done better and at lower cost when given to external vendors.
• The term ‘outsourcing’ is often called business process outsourcing (BPO) and captures a range of outsourced business processes including:
- finance and accounting outsourcing (FAO)
- knowledge process outsourcing (KPO)
- legal process outsourcing (LPO).
• The outsourcing decision should consider several factors and can involve the use of different options.
• There are numerous advantages associated with outsourcing:
- simplification - efficiency and cost savings
- increased process capability
- increased accountability
- access to skill/resources lacking within the business
- provides a capacity to focus on core competencies thus improving in-house performance and several strategic benefits.
• The disadvantages associated with outsourcing include:
- the cost and uncertainty associated with payback
- issues with communication and language
- loss of control of standards and information security
- loss of corporate memory and costs associated with IT, organisational change, redesign and management of hierarchies.

Technology
• The thoughtful application of technology helps a business create a competitive advantage.
• Leading edge technology — the most advanced or innovative at any point in time — can help businesses to:
- create more products quickly and to higher standards
- reduce waste
- operate more effectively.
• Established technology — that is widely accepted and used — helps to establish basic standards for productivity and speed.
Both forms of technology give businesses efficiencies, productivity gains and a capacity to improve operations processes.

Inventory management

• Inventory or stock refers to the amount of raw materials, work-in-progress and finished goods that a business has on hand at any particular point in time.
• Inventory management is a key operations strategy.
• There are advantages associated with holding stock, including being able to respond quickly to changes in demand and allowing development of new markets that can be supplied stock quickly.
• There are also disadvantages that come with carrying stock, including the costs and tying up of money that could be applied elsewhere.
• There are alternative inventory valuation methods, including LIFO (last-in-first-out), FIFO (first-in-first-out) and WAC (weighted average cost).
• At the end of an accounting period, it is important that the value of unsold stock be determined.
• The method of valuation affects the calculation of the value of the goods sold, the value of the unsold stock and the gorss profit.
• Businesses are seeking to become ‘lean’, meaning they emphasise low cost.
Lean businesses apply a just-in-time (JIT) approach to inventory management, which means to make to order.

Quality management

• Quality management refers to those processes that a business undertakes to ensure consistency, reliability, safety and fitness of product purpose.
• The most common quality management approaches are:
- quality controls — inspection, measurement and intervention
- quality assurance — application of international quality standards such as the ISO 9000 series
- quality improvements — continuous improvement and total quality management.
• A focus on continuous improvement is an ongoing commitment to improving a business’s goods or services.
• Innovation, employee involvement and quality are closely aligned and indicate quality working processes.
• Total quality management (TQM) focuses on managing the total business to deliver quality to customers.
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