Advantages of Computer Industry Outsourcing in Taiwan

By Chiu, Chan-Chien; Lai, Chia-Jui et al. | Journal of Global Business Issues, Summer 2009 | Go to article overview

Advantages of Computer Industry Outsourcing in Taiwan


Chiu, Chan-Chien, Lai, Chia-Jui, Chen, Wei-Chiang, Journal of Global Business Issues


ABSTRACT

Taiwan's computer industry depends on outsourcing to implement global logistic management and achieve its goals. Outsourcing has become a useful tactic to gain a competitive advantage. The paper results indicate the following conclusions in Taiwan's computer industry: (1) There are three most important advantages of outsourcing for the user are opportunity to increase financial profit, enhancement of operational flexibility for the organization and ability to concentrate resources on core activities. (2) There are four most important advantages of outsourcing for the provider are entry into new markets or expansion of customer base, furthering the company's competitive strategy, concentration of resources on core activities and control of special resources. (3) There are four most important criteria for selection of outsourcing providers are production capacity and flexibility, quality of service or product, price and credibility with respect to translating commitment into action. Finally, the study also provides some suggestions for the management policies and academic implications for the future research.

Introduction

The growth of Taiwan's computer industry has been accompanied by a transition from original equipment manufacture (OEM) and original design manufacture (ODM) to original design logistics (ODL). This new focus of attention has caused the manufacturer's traditional preoccupation with cost to expand to include "cost, quality, flexibility, and quick response," key success factors that must be addressed as pressure to maintain competitive superiority intensifies and Taiwan's computer companies struggle to adapt to new challenges. Managing challenges include problems of global competitiveness, a short life cycle for computer products, extension of the supply chain, limitations in suppliers' capabilities, customers' requirements and so on.

This research studies the outsourcing activities through which Taiwan's computer companies implement global logistic management in order to manage the process of globalization and compete more effectively in the global computer market. The integration of the supply chain for the purpose of global logistic management is an interesting and important issue for multinational enterprises. The execution of outsourcing activities through cooperation between enterprises and their suppliers is the core issue for implementing global logistic management. In view of the above, issues explored in this study are as follows:

(1) What are the advantages of outsourcing from the point of view of the user?

(2) What are the advantages of outsourcing from the point of view of the provider?

(3) What are the criteria an outsourcing user employs to select outsourcing suppliers?

For purposes of this study the definition of outsourcing activities is value-producing activities requested by one company of another company involving production of parts or components. There are two roles, that of user and provider, in the outsourcing relationship. The outsourcing user is the company requesting that some of its value-producing activities are performed by another company. The outsourcing provider is the company that provides valueproducing activities for another company. This research is based on analysis of a mail survey of computer-related companies implementing global logistic management in Taiwan.

Literature Review

Cooke (1997) pointed out that outsourcing consists of requests by an enterprise for provider companies to perform value-creating activities on its behalf. Each link in the entire supply chain - research/development, manufacture, transportation, warehousing, inventory management, customer service, documentation processing, etc. - has the potential to be outsourced. Maltz (1995) indicated that, once outsourcing is undertaken, the logistic manager must ensure the proper execution of outsourcing activities to make sure that the outsourcing provider can attain the objectives set by the enterprise. …

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