Bring it back? An examination of the insourcing decision

Abstract

Purpose Discussion regarding the implications of and antecedents to the decision to outsource manufacturing functions has dominated both the academic literature and popular press for over 30 years. However, economic and competitive landscapes across the globe have changed such that the tenability of outsourcing is being re-evaluated by many organizations. Using the rich body of literature regarding the decision to outsource as a starting point, the purpose of this paper is to investigate the reasons why firms insource and the associated implications thereof. Design/methodology/approach This case study research captures data from 12 firms in the manufacturing industry that have insourced a previously outsourced function. Data were collected via interviews with executives, researcher observations, and archival records over a nine-month period. Findings The findings suggest that the primary drivers for insourcing were predominantly the same as those cited for outsourcing. However, insourcing decisions are often made in response to a specific, external trigger event and not necessarily in concert with long-term, strategic goals. This is in contrast to firms’ desires to make more strategic location decisions. The findings also show that insourcing/outsourcing location decisions require continuous evaluation in order to optimize competitiveness and align with long-term firm goals. Research limitations/implications This research contributes by not only assimilating and gaining an understanding of key factors affecting insourcing decisions, but also by establishing a baseline for future investigation into this burgeoning area via the presentation of testable propositions. Practical implications This paper provides insights for supply chain, logistics, and operations management professionals who seek to better understand the critical factors that should be considered when deciding whether or not to insource. Originality/value The benefits of insourcing are being considered to a greater extent across industry, yet there is a dearth of academic or practitioner literature that business leaders and academicians can use as the basis for examining this decision. This research provides both the basis and motivation for developing knowledge in this area of increasing importance.

Vertical (Dis‑)Integration and Firm Performance: A Management Paradigm Revisited

“…Moreover, recent research examines reasons why firms re-insource or re-integrate activities that had been outsourced before (e.g. Drauz 2014;Hartman et al 2017). These reasons consist of hidden costs of outsourcing, external triggers like the recent financial crisis or supply chain disruptions and rethinking of core competencies, indicating that managers recently might have recognized or revalued contrary to their longstanding belief that the opportunities of vertical integration might outweigh the challenges under certain circumstances.…”

“…core activities. Hartman et al (2017) point out that the revival of vertical integration since the onset of the recent financial crisis is, among others, attributed to firms rethinking their core competencies. Overall, managers have recognized the uncertainty related to the outsourcing decision as a risk in their supply chains (Kenyon et al 2016).…”

A Prática Do Insourcing Nas Organizações

“…Quanto à base de dados que originou os estudos, 50,0% (HARTMAN et al, 2016;FOERSTL at al., 2016) eram provenientes da base de dados Web of Science, seguido do Compendex com 16,3% (CAPUTO; PALUMBO, 2005), e da ScienceDirect com 33,3% (QU et al, 2010;DRAUZ, 2013). Não houve ocorrência de duplicidade nas referidas bases de dados.…”

“…Em relação aos anos de publicação, observou-se que houve maior concentração de publicações na década de 2010, com 83,3% (QU et al 2010;DRAUZ, 2013;FOERSTL at al., 2016;HARTMAN et al, 2016;HARTMAN et al, 2017) e apenas 16,6% (CAPUTO; PALUMBO, 2005) anterior a esta década. Não houve publicações nos anos 2006,2007,2009,2011, 2014 e 2015 de acordo com os critérios de inclusão estabelecidos nesta RI.…”

Human resource management outsourcing in Spanish firms: Evolution over time and implication for devolution

“…The economic reason is the need of firms to cut costs, such as operational and labor cost in order to improve profitability and add value and save cost with the aim to gain efficiency and improve revenues (Hung Lau & Zhang, 2006). More typical strategic reasons have recently distinguished HRO, including focus on core competences, ensure organization's position in the marketplace (Hartman, Ogden & Hazen, 2017), call for participation of HR departments in strategic issues, achieve greater business flexibility, improve quality by achieving economies of scale, gain access to specialized HR external expertise (Butler & Callahan, 2014;Chiang, Chow & Birtch, 2010;Delmotte & Sels, 2008;Gilley, Greer & Rasheed, 2004;Glaister, 2014;Klaas et al, 2001;Klaas, McClendon, & Gainey, 1999;Quartey, 2013) who have competency in the areas concerned and can offer excellent quality and efficiency (Tremblay et al, 2008;Woodall, Scott Jackson, Newham & Gurney, 2009). In this -context, outsourcing some HRM functions can be seen as an opportunity for the internal HR departments (Delmotte & Sels, 2008) as they can focus on what the organization does best, and contract everything else outside (Belcourt, 2006).…”