Outsourcing, Case Study Example

This paper explores the Problem Solving process for whether or not to outsource work. The analysis goes through a 6 staged approach:

1. Defining the Problem
2. Problem Analysis
3. Generating potential solutions
4. Analyzing the solutions
5. Selecting the best solutions
6. Planning then next steps to take.

This guide is a general approach to problem solving and there are many specialized approaches to this subject matter e.g. Kepner Tregoe, as developed at Princeton University. “Mindtools”  provides a good introduction to the supporting toolsets available as assists to this process  (Mindtools Inc, 2009)

Problem Definition

The problem statement being addressed here is ‘whether or not to outsource the work of the business’. It is important to be clear that you understand what the problem is and how it should be resolved.  This means writing the problem statement down and then ensuring that this is the correct problem that you are trying to resolve.  For example a derivative of this problem statement might be:  Is the Organization able to adopt an outsourcing model?  Here we have used this initial problem to derive a slightly different question but one more in keeping with the direction we wanted to head.  This is an essential check step to ensure you are indeed addressing the correct problem assumption.  (Business Dictionary, 2009)

Problem Analysis

This next step examines the current situation and where you are in terms of it being a problem.  For example how did we arrive at outsourcing being a potential issue ?  What assumption led us to making this a problem ?  We may have decided that cost of direct labour was too expensive in the Company and the products being manufactured.  This in turn was the main cause of producing low profit margins on Product X.  A similar product of considered equivalent quality was being manufactured by a Company in India where the cost of direct labor was much cheaper.  On the face of it a simple solution might be to redirect the manufacturing of Product X to India.  At this stage we are not solutionizing but really assessing the current situation and what needs to be changed.  In our example it is the cost of direct labor on Product X.(Requirements Solutions Group, 2009)

Generating Possible Solutions

We are now at the stage where we have identified the problem to be solved.  The climate which the problem resides in  and the main element considered to be at the root cause of the problem i.e. Cost of direct labor on Product X.  The next step is to consider alternative solutions. This is a brainstorming exercise and we are still not solutionizing. The objective being to consider all the options that might help resolve the problem.  The concept of brainstorming or mind mapping techniques is useful for this stage. Fig1 illustration refers.

Analyzing the Solutions

From  our brainstorming activity we generated 5 possible outcomes or potential means of solving the problem:

1. Stop producing the non profitable item – Product X
2. Outsource to a cheaper labour market – In Country
3. Outsource to a cheaper labour market – Out of Country
4. Change the manufacturing model – the way we produce product X
5. Change the Costing Model – Examine economies of scale in line with supply and demand model

This now converts to an analysis of this point. For emphasis we are still not looking for solutions yet but determination of the good and bad points of the options.

Selecting the Best Solution

This takes the above analysis and looks at prioritization in terms of drawing up a shortlist of the best solutions.  From the 5 presented you may wish to reduce this list to the top 3 in order of acceptability.  This requires you to examine the solutions from a holistic perspective in  terms of the problem statement.  You are now solutionizing and refining your ideas.  One technique is by voting buttons i.e. YES / NO / INTERESTING using intuition and experience to arrive at a potential answer.  You can add a sliding scale  to illustrate best fit maybe a numerical value with 1 = Best Fit and 5=Lowest Fit.

The Table might appear as follows:

The above analysis indicates two possible YES options of equal weight.   You would now look at additional criteria and weightings in order to produce a clear winner or decisive result. Equally you may wish to revisit the problem statement to ensure no contradictions or that it is truly well defined. (Free Management Library, 2009)

Planning the Next Steps

Here you record what you are going to do in order to implement the desired solution.  The activities that people need to accomplish in order to solve the problem.  A simple action planning statement or Gantt Chart often suffices for this purpose.  You need to ensure that adequate resources are made available to solve the problem being careful to watch critical dependencies and potential risks.

Works Cited

Business Dictionary. (2009). Business Dictionary. Retrieved 12 15, 2009, from Business Dictionary.com: http://www.businessdictionary.com/definition/problem.html

Free Management Library. (2009). Problem Solving. Retrieved 12 15, 2009, from Free Management Library: http://managementhelp.org/prsn_prd/prob_slv.htm

Mindtools Inc. (2009).Mindtools. Retrieved 12 15, 2009, from MINDTOOLS: http://www.mindtools.com/pages/main/newMN_TMC.htm

Requirements Solutions Group. (2009). We Build Analysts. Retrieved 12 15, 2009, from Requirements Solutions Group: http://www.requirementssolutions.com/Business_Problem_Analysis.html