Please answer original forum with a minimum of 250 words and respond to both students separately with a minimum of 100 words each
page 1 Original Forum with References
page 2 Ben response with references
page 3 Dominick response with references
Explain what factors would typically be considered in contingency planning in outsourcing arrangements. Please give an example to back up your answer.
Part II: End your initial response with a follow-up question for your classmates to address in further the discussion.
This week while reading on contingency and outsourcing it reminds me of many instances within the last year that it has never been more true and accurate within the supply chain. Many vendors and manufacturers had to change courses and outsource while trying to maintain operations during the pandemic. “Developing a contingency plan against supply disruptions during the formation of a supply chain is important because strategic decisions after their execution may be difﬁcult to change quickly”. (deMatta 2017). COVID made this thought process difficult because everyone globally was trying to pivot and work contingency operations simultaneously while still trying to figure out versus having something in place already.
Contingency: The term in itself expresses emergency, or a reactive action to an original plan based on some unforeseen causes. In the military there is an acronym we call P.A.C.E and it used when we are set to plan, communications and many other things. This thought process helps avoid failure due to Murphy’s Law. Primary, Alternate, Contingency, and Emergency is what the acronym stands for. I think the largest and most recent example of this would be COVID-19 and how it changed our systemic ways of doing things and challenging relationships within the supply chain. “Contingency planning has become an important strategic issue for manufacturers and distributor” (de Matta, 2017)
Outsourcing: The hiring of an employee in a foreign country to do your bidding on a specific designated task.
de Matta, d. (2017). Contingency planning during the formation of a supply chain. Annals of Operations Research, 257(1), 45–75. https://doi.org/10.1007/s10479-015-2085-0
As we talk about the continued growth and increased globalization throughout the world, it is evident that outsourcing arrangements are becoming increasingly common among companies worldwide. In fact, the global market for outsourcing was estimated to be around $85 billion in 2018 alone (Overby, 2017). Outsourcing can provide many benefits to a company such as lower costs, greater flexibility, enhanced expertise, greater discipline and the ability for companies to shift more focus on other core activities (Kluyver, 2012). With additional benefits to outsourcing come additional risks associated with it as well. Mitigating these risks is captured in contingency planning.
Contingency planning encompasses multiple aspects of the outsourcing transaction and should be considered before an outsourcing agreement is finalized. Factors such as probability, impact, order, and risk mitigation are all of significant importance when looking at potential outsourcing clients.
Probability: this refers to the likelihood that an event or issue will arise and should be considered within the contingency planning process. For example, looking at the probability of said business facing a power outage is high while other factors such as natural disasters may be lower depending on geographical location.
Impact: this factor relates to the level of impact that an event can have on operations within that organization. In order to fully capture this aspect of contingency planning, the Federal Emergency Management Association, commonly known as FEMA, has recommended conducting an annual business impact analysis. It is important to note that these disruptions can be either tangible or intangible.
Order: contingency planning steps must be taken in an order that makes sense Ensuring the steps are taken in a specified manner ensure that important details within the process are not missing.
Every organization that outsources needs to have a solidified contingency plan should their outsourced organization fail. For example, a company that outsources to Thailand for clothing manufacturing should also have contracts in place with other manufacturers should their primary source fail.
Do you think there is a relationship between a company’s size and their likelihood to outsource?
Kluyver, C. A. (2012). To Outsource or Not to Outsource. Saylordotorg. https://saylordotorg.github.io/text_fundamentals-of-global-strategy/s10-02-to-outsource-or- not-to-outsour.html
Lohrey, J. (2017, November 21). Factors That Influence Contingency Planning. Your Business. https://yourbusiness.azcentral.com/factors-influence-contingency- planning-27062.html
Overby, S. (2017, November 7). What is outsourcing? Definitions, best practices, challenges and advice. CIO. https://www.cio.com/article/2439495/outsourcing-outsourcing-definition-and-solutions.html