Operations Management: Processes and Supply Chains, 12th Edition

Outsourcing Processes

All businesses buy at least some inputs to their processes (such as professional services, raw materials, or manufactured parts) from other producers. Most businesses also purchase services to get their products to their customers. How many of the processes that produce those purchased items and services should a firm own and operate instead? The answer to that question determines the extent of the firm’s vertical integration. The more processes in the supply chain that the organization performs itself, the more vertically integrated it is. If it does not perform some processes itself, it must rely on outsourcing, or paying suppliers and distributors to perform those processes and provide needed services and materials. Some ...