Businesses
must have a balance between cost and quality when producing their service or
product. The business must find a balance in the aspects of outsourcing,
technology and inventory management.
One management strategy where difficulties arise is the balance between cost and quality in outsourcing. Outsourcing can be beneficial for a business when they use access to cheap labour. This lowers the businesses costs when producing a product or service. When a business uses cheap labour it can sometimes result in poor quality which may be detrimental to the resale of the overall product or service. Even though cheap services can produce poor quality some cheap labour can offer skilled labour that the businesses themselves cannot produce. Although the business may be saving money when outsourcing their production, the changes made in organisational processes may incur costs and the business may not experience the savings for two or more years. A company who has used outsourcing is Dell. Dell outsources its call centres to India which resulted in lower costs for the business whereas there has been continuous problem when Dell has to train employees with language and cultural backgrounds and some customers still do not find the call centres helpful then proceed to use other brands.
Technology is another management strategy that can incur complications when balancing cost and quality. More advanced technologies can sustain costs for a business. While businesses want to lower costs, advanced technologies can create a competitive advantage as the technology can help them work more efficiently than other businesses may be able to. Whereas some businesses do not need to update their technology and can work efficiently and sustain quality with the technology they already possess or cheaper technology, which will keep costs low. Google is one of the most innovative companies when it comes to technology. It provides customers with a new way to research and keep connected. By being one of the world’s most innovative companies in technology it attracts customers to the business therefore creating a large customer base.
The last aspect that business has trouble with when balancing cost and quality in the business is Inventory management. When a business has inventory they usually purchase or make their products in bulk resulting in reduction of costs for the business. Inventory management can also allocate costs when there is a spoilage of their products, storage management, obsolescence when stock is unsold, insurance and theft and handling. Nike is a renowned company that uses inventory management and has since the 1900’s, Nike lost around 100 million in sales to poor inventory management. Since they have implemented a new inventory management system the loss in sales has decreased dramatically.
One management strategy where difficulties arise is the balance between cost and quality in outsourcing. Outsourcing can be beneficial for a business when they use access to cheap labour. This lowers the businesses costs when producing a product or service. When a business uses cheap labour it can sometimes result in poor quality which may be detrimental to the resale of the overall product or service. Even though cheap services can produce poor quality some cheap labour can offer skilled labour that the businesses themselves cannot produce. Although the business may be saving money when outsourcing their production, the changes made in organisational processes may incur costs and the business may not experience the savings for two or more years. A company who has used outsourcing is Dell. Dell outsources its call centres to India which resulted in lower costs for the business whereas there has been continuous problem when Dell has to train employees with language and cultural backgrounds and some customers still do not find the call centres helpful then proceed to use other brands.
Technology is another management strategy that can incur complications when balancing cost and quality. More advanced technologies can sustain costs for a business. While businesses want to lower costs, advanced technologies can create a competitive advantage as the technology can help them work more efficiently than other businesses may be able to. Whereas some businesses do not need to update their technology and can work efficiently and sustain quality with the technology they already possess or cheaper technology, which will keep costs low. Google is one of the most innovative companies when it comes to technology. It provides customers with a new way to research and keep connected. By being one of the world’s most innovative companies in technology it attracts customers to the business therefore creating a large customer base.
The last aspect that business has trouble with when balancing cost and quality in the business is Inventory management. When a business has inventory they usually purchase or make their products in bulk resulting in reduction of costs for the business. Inventory management can also allocate costs when there is a spoilage of their products, storage management, obsolescence when stock is unsold, insurance and theft and handling. Nike is a renowned company that uses inventory management and has since the 1900’s, Nike lost around 100 million in sales to poor inventory management. Since they have implemented a new inventory management system the loss in sales has decreased dramatically.
figure 1.1: The balance between cost and quality that a business should aim for.