"Outsourcing: an arrangement in which one company provides services for another company that could also be or usually has been provided in-house."

Primary Benefits
The lure of outsourcing is comprised of several components: reduce costs, bring focus to core business operations, and realize access to experts.

This business model lowers life cycle costs, improves time to market, reduces capital investment, improves risk management, provides access to state-of-the-art manufacturing, and allows the Original Equipment Manufacturer (OEM) or Retailer to focus on its core business.

Outsourcing Transition
Faced with increasingly complex challenges, businesses are rapidly moving toward a highly specialized 'value network' model. In this new model, companies focus resources on their strategic assets, and outsource everything else.

According to the research firm of Coopers & Lybrand, 81% of American companies use outside sources to perform some function. This compares to 50% five years ago, and the trend of turning to the outside for capabilities continues to grow. As the new millennium has dawned, companies have come to understand that outsourcing is a viable way to improve their core business, while reducing expenses, personnel, and overhead.

Contracting out tasks that are not part of a company's core competency can free up cash for other, higher return investments. Also, managers can focus on issues that are key to growing their business in product development rather than getting caught up in the day-to-day labors of manufacturing. Finally, it is the ability of the contract supplier to respond to the peaks and valleys typical in the manufacturing process that makes outsourcing so rewarding for a company.

Top 10 Reasons Companies Outsource with Production Technologies

 1. Reduce and control operating costs
 2. Improve company focus
 3. Gain access to world-class capabilities
 4. Concentrate on customer relationships
 5. Free internal resources for other purposes
 6. Resources are not available internally
 7. Function difficult to manage/out of control
 8. Make capital funds available
 9. Cash infusion
10. Share risks