Outsourcing is the transfer of certain functions of the company to another organization that has the capacity and staff for the effective and efficient performance and implementations of these functions (Haugen, 2009).
In the case of the airline companies that provide the services it is vital to perform the process efficiently in order to reduce costs. For the cost reduction a lot of companies prefer to give some elements of value chain into the outsourcing. There are some elements of value chain of the airlines performance that should be outsourced: cleaning, baggage handling need a lot of people and machinery, this processes are cheaper when they are done by the companies with special specialisation; safety modifications and technology development process need a lot of knowledgeable people and money for the development, designing and testing of new products and they need big expenses. The least amenable process to outsource is catering, because it doesn’t need highly professional cookers, as the food that is serviced by the airlines companies are relatively easy dishes, fast food and candies.
The manufacturer of cross-country buses deals with lots of specific process, which are different in their essence (Rolstadas, 2012). Therefore, it is cheaper for the company to give others companies opportunity to solve its problems. Depend on the size of the company the below list of the processes can be outsourced because of the higher level of professionalism of the specific companies, which are working with these processes: the supplying of row materials, components and other stuff for the production; marketing; human resource services (hiring, training, firing). However, there are some of the processes that cannot be outsourced because of its inefficiency, for example, system support and machinery services. This is so, because during the production process some little breakage can happen that can be fixed in 1 minute, therefore the company should have the person who can provide technical assistance in any minute of the production process.
The cost of the production by the company of the unit will be = 10+(60000/10000)=16. Therefore, the cost of the own production of 1 unit is $16, however the cost to buy such unit is equal $13. Therefore, for the company the outsourcing of the particular manufacturing operation is cheaper.