Benefits of Outsourcing to U.S Military
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Outsourcing is a common business strategy practiced by both private and public organizations (Kremic, Tukel & Rom, 2006). Most originations outsource the functions they initially conduct themselves. U.S military is one of the government institutions that have embraced the outsourcing practice. Organizations outsource some services with the objective of achieving various benefits upon successful outsourcing. However, the outsourcing practices have a significant effect when unsuccessful. The primary advantages of the U.S military outsourcing practice are cost savings, strategic outsourcing, and embracing new technology.
Cost and Time Saving
The motive to cut cost is practical when the supplier’s costs are relatively lower than the outsourcing organizations’ cost of production. The primary reason for the ability of the suppliers to cut cost is economies of scale and specialization (Kremic, Tukel & Rom, 2006). The U.S military takes advantage of this level of efficiency to outsource some functions to the external parties. Consequently, the military cuts cost and have the ability to survive within the budgeted resources by the government. The U.S military also outsources with the intention to reduce the indirect cost such as having fewer employees, support systems and infrastructure. Some of the projects that the U.S military outsources include Air Force maintenance upgrade on artillery system among others (“Outsourcing Military Public Affairs”, n.d.).The process of making a decision is crucial in any organization or institution. The process of making strategic decisions varies with pattern and does not always follow a typical pattern (Gewald, 2010). This is attributable to the urgency, importance and scope of the decision.
Strategy Driven Outsourcing
Outsourcing some functions have also been practiced with the objective of addressing some strategic issues (Gewald, 2010). Flexibility and core competency are reasons for outsourcing in improving the efficiency in operations of an organization. The U.S military has been practicing outsourcing practices facilitate ultimate focus on the core competencies. The primary function of the military is boosting the defense of a country’s sovereignty. Thus, some functions may shift the focus on the core role of the army hence the need to outsource some functions such as assembling of military machines and equipment. Consequently, the military redirects resources in areas with the greatest positive impact particularly ensuring peaceful co-existence of the citizens and preventing external attacks to the citizens.
Harnessing the Latest Infrastructure and Technology
The technology has been evolving. The adoption of the modern technology has proven to be effective and efficient according to various study (Kremic, Tukel & Rom, 2006). The development of the technology has contributed positively to the performance of both public and private organizations. The U.S military outsources with the motive to access the developing technology. The military might lack the creativity and innovation that can be obtained through outsourcing and significantly influence the efficiency of the military in performing the core duties.
Application of Incremental Analysis in U.S Military Outsourcing Decision
The process of making decision involves choosing the best course of action among alternatives. Incremental analysis is a process that establishes the financial fluctuations under the alternative courses of action. Thus, the techniques identify the changes that might occur on the revenues and costs on different alternatives. The incremental analysis identifies the possible future consequences upon executing a decision (Crosson & Needles, 2014). The U.S military can utilize the incremental analysis to establish the effectiveness of outsourcing some functions as opposed to conducting them. The incremental analysis gives the easiest approach in the process of making a decision and at the same times saves time.
The U.S military can engage in outsourcing through analyzing the cost of insourcing to the cost of outsourcing using the incremental analysis. This can be done by comparing the cost of developing military products and the prices offered in the market. For instance, the military can get a contract with an external party for maintenance of artillery systems. In a free market, the number of suppliers and buyers are high, and the military has the option to place bids to the public and identify the cost effective bidding. Once the military obtains a viable bidder, the external party is given the role of marinating the artillery systems.
Rather than the cost consideration, the U.S military should consider the core competencies of the bidders to guarantee quality, confidentiality, and superior service delivery. The military systems are critical to a state’s security. Therefore the U.S military should thoroughly vet the bidders to meet the objective of outsourcing and avoid compromising the safety of the country.
Application of Incremental Analysis in Businesses
Incremental analysis plays a vital role in various business decisions on outsourcing. The main objective of a business is to generate profit at the lowest cost without compromising the quality of the products or services. The business makes the use of incremental analysis on deciding on outsourcing as discussed below.
Make or Buy Decision
The make or buy decision make the utilization of the incremental analysis. A business decides whether to manufacture a component in the process of production or buy from the suppliers (Myer, 2006). When determining the right course of action, a business compares the cost of production to the price of purchasing the component from the supplier. Further, the business considers the ability of the supplier to maintain the quality and standard. After considering these factors, business decides on the make or buy situation.
Sell or Continue Processing Decision
During the process of manufacturing, a business might be faced with an option of selling the work in progress component or continue processing to the final stages of a product. In such case, a business considers whether the incremental revenues from a refined product cover the increased costs of additional processing (Crosson & Needles, 2014). If the incremental revenues are higher to offset the higher costs of additional processing, the business decides selling and vice versa.
Special Order Decision
A business might be faced with a special order from customers. In most cases, the special orders are placed at reduced prices. In such a situation, a business might decide to outsource the production (Myer, 2006). The decision can be influenced by the fact that, the order might necessitate additional cost to sustain the capacity while at the same time conducting the normal operations. For instance, the order might require the acquisition of additional machinery, and the business should consider the cost of executing the order or outsourcing.
Upon Changes in the Technology
The development of the production processes and the use of technology usually involves adjustments of costs. A business might find it a challenge to adjust promptly on the technological development (Crosson & Needles, 2014). In such situation, an incremental analysis is used to analyze the incremental costs associated with such changes and a decision made on whether to outsource or implement the new technology.
Crosson, S., & Needles, B. (2014). Managerial accounting. Mason, Ohio: Cengage Learning.
Gewald, H. (2010). The perceived benefits of business process outsourcing. StrategicOutsourcing: An International Journal, 3(2), 89-105.http://dx.doi.org/10.1108/17538291011060321Kremic, T., Tukel, O., & Rom, W. (2006). Outsourcing decision support: a survey of benefits,risks, and decision factors. Supply Chain Management: An International Journal, 11(6),467-482. http://dx.doi.org/10.1108/13598540610703864Myer, G. (2006). Incremental Analysis. Community.plu.edu. Retrieved 11 August 2017, fromhttps://community.plu.edu/~mgtacctg/incremental_analysi.htmOutsourcing Military Public Affairs. Ou.edu. Retrieved 11 August 2017, fromhttp://www.ou.edu/deptcomm/dodjcc/groups/98B2/paper.html