Changing Myopic View on Outsourcing Decision in the Manufacturing Industry: A Case from Malaysia

Abstract

The purpose of this study is to understand the factors influencing outsourcing decision in the manufacturing industry. Existing literature reveals that manufacturing industry face with challenges in the competitive environment with expectation to produce products at the lowest cost possible yet meet customer specification without affecting the quality and delivery schedules. Thus, outsourcing has become one of the alternative opportunities among the manufacturing firms. The theoretical framework is developed to understand four components namely operating cost, new product development, internal resources and technology, and as well as management competency as the determinants of outsourcing decision. This is a quantitative research and survey instrument was used. The questionnaire was distributed to 150 firms in Northern region of Malaysia with a response rate of 45%. The data was analyzed using regression to test the hypotheses. The findings showed that capital investment, latest technology and high efficiency becomes the key determinants for outsourcing decision among the manufacturing firms. It poses some implications for managers and policy makers.

Evaluation of Lead Logistics Provider Using the SMART Process: A Case Study in a Taiwan Automotive Industry

“…This condition has forced manufacturing industries to put more consideration to their core capability, thus outsourcing activities become an important and strategic decision (Surjandari et al, 2010). However, outsourcing can provide a number of long terms benefits: lower operating cost, improve competitiveness, reduce in capital investment, shift resources to focus on core functions, generate demand for new growth and market segment, access to world class capability, sharing risks and making capital funds available for core business investment (Chelliah et al, 2011). Often called "the third profit source," the logistics of automobile manufacturers must meet production goals and also adapt to market changes to save cost and enable quick response time.…”