Week 6 Personal Blog

My Personal Blog Week 6

In most, if not all, outsourcing transaction, supplies find themselves in a competitive environment.   This environment often involves the issuance by a prospective customer to several suppliers of a request of a proposal that likely contains business and legal terms and conditions and requires suppliers to indicate their willing to accept them.  Most suppliers recognize that the leverage lies with customers, but more recognized and proficient suppliers. Accordingly, suppliers increasingly focus on the pricing adjustment and liability- related provisions of the outsourcing agreement in part, to reduce the likelihood that their profit margins will be further eroded.  The benefits and limitations to outsourcing would be that of cost saving which the lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, and restructuring. Another benefit would be that of tax benefits, countries offer tax incentives to move manufacturing operation to counter high corporate taxes within another country. The limitation of outsourcing would be the scope of services.  A supplier may reduce its risk through extensive due diligence, but suppliers are often not provided with adequate access or time to conduct it, and suppliers must weigh the substantial costs of such due diligence against the likelihood of selection.

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