MIT Sloan Management Review

Since the mid-1990s, many companies have outsourced or offshored their manufacturing operations. For most, one crucial enabling factor was cheap oil: Long supply lines were economically feasible because transportation costs were relatively low. Hence, companies emphasized reducing manufacturing costs through (1) offshoring or outsourcing; (2) plant rationalization; and (3) consolidating distribution centers and warehouses to reduce inventory levels and minimize fixed facility costs.

With complex products such as automobiles, integration is a key element of performance. That means managers must understand which activities and competencies they can safely outsource and which they need to keep.

Too often, discussions of contemporary economic issues end up either overly simplified for popular consumption -- or too jargony and technical to be followed by anyone but economists. A new book, Offshoring of American Jobs: What Response from U.S.

The “make or buy” decision has been a staple of industrial economics as far back as the start of the Industrial Revolution. So when perceived levels of outsourcing began to rise around the world over the past decade or two, researchers began to ask why.O

Companies should evaluate an outsourced process on several dimensions and then tailor the contract accordingly.

The burgeoning trend of sending manufacturing to cheaper offshore locales often conflicts with increasing demands for speed and customization.

Successful outsourcing of back-office business functions requires knowing not only your company’s needs but also the 12 core capabilities that are key criteria for screening suppliers.

Spreading foreign operations and outsourcing relationships over a broad, well-balanced mix of regions and countries reduces risk and increases potential reward.

The increasingly common practice of migrating business processes overseas to locales such as India, the Philippines and China is often seen as a negative phenomenon that suppresses domestic job markets. On the contrary, says the author, offshoring is a critical component of next-generation business design, a dynamic process of continually identifying how to deliver superior value to customers and shareholders.

Outsourcing can be more than a tool for cutting costs and improving organizational focus. Increasingly, it is a means of acquiring new capabilities and bringing about fundamental strategic and structural change.

Business-process outsourcing is a key trend shaping the future of human resources. Six factors can help companies determine which HR processes to outsource and which to retain.

As service and product outsourcing become more commonplace, new organizational forms are emerging to facilitate these relationships. Chase Bank has created “shared services” units that compete with outside vendors to furnish services to the bank’s own operating units.