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Outsourcing analysis: definition and important aspects for buyers
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Outsourcing analysis in a nutshell:
The outsourcing analysis is a systematic investigation to evaluate the cost-effectiveness of in-house versus external services for products or services. For purchasing, it is an important tool for making well-founded make-or-buy decisions and identifying cost potential through outsourcing.
Example: An automotive supplier conducts an outsourcing analysis for its plastic injection molded parts and determines that outsourcing production to a specialized supplier reduces unit costs by 23% from EUR 12.50 to EUR 9.60, while at the same time avoiding investments of EUR 2.5 million for new machines.
Contents
What is an outsourcing analysis?
The outsourcing analysis, also known as "make-or-buy analysis", is a strategic instrument in procurement management. It is used to make decisions on whether certain products or services should be produced internally (make) or purchased externally from supplier management (buy). Costs, resources, competencies and risk management are comprehensively evaluated in order to determine the optimal procurement strategy for a company.
Core elements of the outsourcing analysis
Significance for purchasing
In purchasing, outsourcing analysis is essential for making well-founded decisions about the procurement strategy. It helps to optimize costs, increase efficiency and build strategic partnerships with suppliers. The analysis enables buyers to determine when it makes sense to use external suppliers in order to increase flexibility and focus on core competencies.
Outsourcing analysis: from manual decisions to data-driven analysis
The outsourcing analysis is essential for companies in order to create a sound basis for decisions on the outsourcing of products or services. Building on the theoretical basis, it becomes clear how important a strategic approach is in practice. Traditional methods are reaching their limits in today's complex business world, which is why a transformation towards modern approaches is necessary in order to secure competitive advantages and achieve operational excellence.
Old: Manual outsourcing decisions
Traditional approach: In the past, outsourcing decisions were often based on experience and simple cost-benefit analyses. Without extensive data analysis, decisions were made that could later turn out to be inefficient or costly. Tools were limited to spreadsheets and manual processes. This led to limited transparency, increased risk management and a lack of flexibility in the face of market changes.
New: Data-driven outsourcing analysis
Data-Driven Outsourcing Analysis: The modern approach integrates advanced technologies such as big data and artificial intelligence to optimize decision-making processes. By comprehensively analyzing internal and external data sources, companies can create accurate forecasts and simulate scenarios. This enables a detailed assessment of costs, risks and strategic effects. The use of specialized software increases efficiency and accuracy, allowing sustainable competitive advantages and significant cost savings to be realized.
Practical example: Automotive industry
A leading automotive manufacturer was faced with the decision of whether to set up the production of electric motors itself or outsource it. The data-driven outsourcing analysis was used to analyze all relevant factors such as product costingtechnological expertise of the suppliers and market risks. The result showed that outsourcing to a specialized supplier would reduce production costs by 20% and shorten the time to market by six months. This resulted in annual savings of 50 million euros and faster access to innovative technologies.
Conclusion on the outsourcing analysis
The outsourcing analysis is an indispensable strategic tool for modern companies. By systematically evaluating costs, resources and risks, it enables a well-founded decision to be made between in-house production and outsourcing. Success lies in the holistic consideration of all relevant factors and the careful weighing up of long-term strategic effects. Particularly in the context of increasingly complex supply chains and digital transformation, outsourcing analysis is becoming increasingly important for sustainable corporate decisions.
