Measuring Outsourcing Efficacy: An Examination of Performance in the Aerospace Sector

Abstract

O n-site outsourcing can be an effective strategy for organizations but operational performance may be temporarily hindered and recovery from this can take many months.This study explores an instance of outsourcing in an aerospace maintenance and repair operation (MRO) in South Wales, where the inbound materials handling and warehousing (IMHW) function has been wholly outsourced to a third-party organization. In this respect the study is novel and sheds new light on the operational performance benefits of outsourcing.The host organization, located in South Wales, employs over 1000 staff and its annual turnover is in excess of £1 billion. The outsourcing organization is a provider of workforce solutions to organizations in aviation, defense, government, and technology sectors. After outsourcing the IMHW function, the host organization's staff were retained and re-employed in other areas of the facility.Specifically, this study provides a quantitative analysis of the IMHW function, comparing the throughput and accuracy of the function before and after outsourcing. The analysis is made based on data extracted from the host organization's management information system (MIS), spanning the 13 months prior to, and 16 months post, the function being outsourced.Using trend analysis, correlation, and linear regression analysis it finds that on-site outsourcing can deliver comparable operational performance, in terms of 1 JEL classification codes: M00, M10.On-site outsourcing can deliver comparable levels of operational performance for the host organization.Preparation for functional handover requires careful planning to minimize disruptions and maximize operational benefits.Host organizations have a vested interest in continuing to support the outsourced function after operational handover to maximize performance.