All business processes have multiple components. These
components involve products and services which can either be produced by the
business itself (i.e. in-house production), sourced from a few specialized entities
(i.e. outsourcing) or can be sourced from a large number of outsiders (i.e.
crowd-sourcing). The advantages and disadvantages of each are given below:
In-house Production
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It generally tends to be cheaper as the margin
on those products/services are kept inhouse. Also the business has better
control over the process and quality and hence is less dependent on outside
entities.
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The downside is that this option has higher fixed
costs and the required skills may be missing in the production. Also this
option is operationally challenging.
Outsourcing
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The biggest advantage of this option is lower
fixed costs. This ensures that the business is in a better position to handle
business cycles. Also outsourcing to specialized entities tends to ensures
better quality of products and services.
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The downside is that the business becomes
dependent on outsiders. As a result, gaps in information flow and communication can emerge.
Crowd-Sourcing
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This option is highly scalable and provides the
business with large and cheap operational capacity.
-
The biggest drawback in this option is that quality
control is a big challenge.
All
3 options can be used by any business. The business must assess its priorities
and make a decision accordingly.
