Contracts and procurement case study

Various departments of a firm face outsourcing such as the human resource, marketing, IT, finance and even the inventory stores. For huge generation of monetary income a business has to handle a wide array of inventory beside the bills, accounts, and expansion projects.

The functions of the departments have to be diligent and efficient for consistency. A wise entrepreneur is one who is in a position of boldly base decisions against all odds with the aim of curtailing on the cost and having things done in a timely manner besides ensuring customer satisfaction hence loyalty. (Howe, 2010)Lack of proper planning over the management diverts and dilutes the focus from the core business goals.

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In most instances, people outsource the tasks they are not core competent at such as IT, which is contrary to the Futronics Inc. Others will prefer to stick to the key business tasks while they outsource all the other tasks. It is equally common to subcontract a failing sector, with the aim of improving it.

Currently the argument behind outsourcing at Futronics revolves about reduction on cost as the main driver. There are many cons associated with outsourcing which the analysts need to consider before making the decision. They include, staff proceeds, it would be logical if the company can cater for the four employees at the department under question.

It is the social responsibility of the company over the issue of laying-off. One huge challenge to the analyst regards the risk involved in reducing control over the central office store. He would also need to have good analysis over the profits made by the firms to be outsourced. Considering the proposals, the companies have a wide pricing advantage due to the mass buying. The catalogues also indicate over quotations meaning higher profit margins.

Majority of the challenges associated with outsourcing are not enough reason to avoid it. People want to gain access to specialized skills for better and timely product delivery. Other good reasons include but are not limited to better business transactions or processes, flexibility on staff allocation, better workflow, business continuity and ability to focus on key sectors of the business among other reasons. The analyst has to focus on the key reasons for considering outsourcing over the in-house management.

In the case of Futronics Inc, which is under business threats by competitors, the main aim of outsourcing ought to be reducing cost without sacrificing growth. Replacement of the company’s central store operations with huge inventory and service delivery is a huge risk over control, but highly reduces on the expenditure. (Kahn, 2009) The business might be able to come back to its strong basis and fight the competitors back to status quo.

The concept is highly compromised but comparing the outcome to the status of the firm provides this as the better option. The cost of having in-house employees is still higher in comparison to subcontracting. Dealing with fewer inventories is expensive and inferior too.

The third party providers have excellent knowledge, skill and experience of how to undertake the proceedings and in this case keep the business on the competitive edge. Arguably, the employees in the central store are equally competent enough but without proper supplies, they cannot maintain the firm’s endeavours.

According to Kahn (2009), outsourcing would be an automatic guarantee for quality and profitability of the firm especially when the tendered team is competent enough and has good standing in the field. The business is as stake and efficiency accuracy and quality provided by outsourced panel would provide the required service to revive the business and thus save its reputation. (Greene, 2009)

Considering the analysis conducted, the items would be available at lower prices and still provide the company with an initial reasonable savings of about 6 percent. Outsourced team gives the business a chance to access specialized skills and wide range of products because of its expertise nature and higher investments.

The current employees in the central store if retained also have the chance of acquiring the skills and advancing to beat the competitors in future. The specialized skills enable the business to capture and capitalize on the intended market niche. The business also has the chance for accessing skills to supplement to other fields of operations beside the inventory store.


Evidently considering the above-mentioned analysis it would be more benefiting to consider subcontracting since creates a contractual obligation or liability that is higher and thus more advantageous to the business compared to the in-house contraction. There is a safer bet when the there is a signed contract.

Arguably, an outsourced team affects the current staffing issues and reduced control but considering that, this is a core department in the business the in-house employees and firms input requirements might not be in a position to handle pressure associated with the current advancement that are anticipated.

The function of the store would also become critical in the hands of the providers because of the specialization involved the risk of collapse faces mitigation. Today it is equally easy to tie such urgent issues to the specialized groups due to security through the insurance covers.

The overall management would have to come into acceptance of losing the opportunity of control for the contacted three years, which are probably adjustable but enjoy the opportunity cost thereafter. Every business occasionally is overwhelmed with functions thus the need for the extra hands. Management enables the business to meet demands and the pressure associated with profits and competitions.


Greene, O. (2009, December 10). Outsourcing – The Best Way to Do it successfully.

Retrieved January 7, 2010, from—The-Best-Way-to-Do-it-Successfully!&id=3407595

Howe, M. (2010, January 3). Serious Entrepreneurs Don’t Do Everything Themselves – They Outsource. Retrieved January 7, 2010, from—They-Outsource&id=3514402

Khan, M. H. (2009, February 17). Advantages of IT Outsourcing Over In-house Development. Retrieved January 7, 2010, from


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