Monday, January 20, 2014

How does outsourcing make the quality of products or services better?

How does outsourcing make the quality of products or services better?
There is little to no evidence that outsourcing business processes improves quality of goods or services. Improvements in technology quality and greatly reduced costs in deploying technology implementation has (theoretically) reduced labor training costs, allowing processes that once took skilled labor to be performed by less skilled labor.
There is some argument that outsourcing allows manufactures to more rapidly design, test and produce new goods, but the arguments are substantially based on the proposition that social costs are not a direct cost element in off-shore manufacturing (where environmental, workforce and other social impact costs from manufacturing are not monetized as a cost to the manufacturer).

Improvements in services from outsourcing has been more problematic. Several studies indicate that the only "improvement" in service provision is a reduction in labor costs with little to no improvement in service quality. In many instances, service quality has deteriorated when service labor was off-shored.

As technological improvements reduce capital equipment costs and allow for the easy movement of processes from country to country, manufacturers will chase low-cost labor in the unending quest to maximize profits through reduction in unit costs.

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