It also stunts any scope for improvement or innovation as it is too focused on sticking to the set benchmarks. This often leads to poor overall performance of the organization in the long run which in turn affects the going concern of the business. Secondly, it utilizes a single, volume-based cost driver which leads to the distortion of the cost of products. It traces overheads to products or services usin... ... middle of paper ... ...osts and where to apply efforts to curb inflationary costs. This can be of particular value in tracking new products or customers and also solves the cross-subsidies problem linked to traditional costing system by separating overhead costs into different cost categories or cost pools.
A large-scale IT outsourcing projects is not easy to run and monitor. A substantial impact on business will be created due to the failure in governing IT operations. As IT outsourcing provides many other benefits and saving expense, security impact and risk management should also be analyzed at its earliest. In order to ensure proper IT outsourcing project and services management, it is necessary to conduct regular reviews and on-going monitoring. Lastly, it is concluded that, outsourcing if not executed properly then it can cause risk.
Particularly, those that take the time to properly structure an agreement that drives cost reduction, takes advantage of outside providers best practices, clearly defines scope and service levels that meet the company’s needs (Savitz, 2013). However, for some financial firms it may be better to insource company activities. Reasons for this are failure to meet expectations, desire for In-house expertise and marketplace pressures. Failure to meet expectations is most common in the financial services industry. Companies may find that services from an outside provider cost more than expected due to hidden costs.
However, the issue becomes that due to the delays in the system, the production rate fluctuations are magnified. Discrepancies in customer order rate can have a significant impact on the inventory levels, production rate, and labor force. Depending on the level of sensitivity in the adjustment times, these changes could lead to product shortages/overages and end up being very costly to the firm. Periodicity of Flucuations The amount of time it takes for a period of a fluctuation, that is how frequent the fluctuations are, will certainly impact the stability of a firm. After all, long-term fluctuations are merely trends.
The hidden costs When the reducing the cost is the objective of outsourcing, there is usually the early promise to cash flow interest and the long term of cost savings. There is two tendencies, however, that are of concern. Firstly, companies underestimating the costs associated with the identifying and assessing suitable IT vendors such as including the relocation of the setup costs, costs, maintenance costs in parallel or handoff more longer than expected and relocation costs.Secondly, companies with the management may be under the estimated costs. Some of the companies does not ever expected with the time and management resources, thus the costs must be put in. Companies are rarely record management costs.The cost of resulting from the disruption and lack of skill on the part of the vendor to respond in the fast.
The question then arises; should companies continue to use JIT in the event of major uncontrollable environment occurrences? According to Srinidhi and Tayi (2004), companies that are flexible enough and are able to change from a JIT system to a traditional inventory system will have a competitive advantage over other firms who do not switch. In such uncontrollable environments, the major benefit of JIT becomes a handicap with the increase in delivery times and the added data handling and coordination required in such times. This leads to a decrease in quick response time, which ultimately leads to increase in costs to the firm. During hard economic times it may be possible for a firm to switch suppliers be it from domestic to international or vice-versa for some required materials.
Problems such as not being able to monitor what the employees are buying and what they should can lead to losses. Monitoring may be the obvious way out for shareholders but in the long run, this can lead to accumulated costs for the firm. Therefore, it is important to overcome this problem with methods s... ... middle of paper ... ...actors, such as the type of task, need to be carefully examined in order to make the optimal decision about adopting a particular style of management. As we can see, monetary means is not the only factor in which managers can use to motivate employees. Interesting work and employee pay appear to be important links to higher motivation of centers' employees.
Another important goal that IT outsourcing takes on, is reducing technological risk. By outsourcing your needs you know that that the employee know what they are doing. Some of the problems IT outsourcing may encounter are, loss of strategic control, risk of technological obsolescence, limiting of long-term flexibility, difficulty in benchmarking initial contract, hostage to additional charges, high exit or switching costs, limited choice of vendors, the fixed nature of legal contracts, legal exposure, from dissatisfied former employees, and cultural conflicts. The people doing the outsourcing for the companies are sometimes the life's-blood of that company. If the outsourcers want more money, then they are almost obligated to give that money.
I agree with Angi that there are many different and often conflicting strategies when it comes to financing though equity or debt. The reason for the conflicting strategies I find lies in the negative aspects of both internal and external financing. External finance requires either giving up control, or going into debt, and internal financing, can bring an unwanted reduction in available liquid assets, should the company suddenly need them (McMahon, 2014). I also concur with Angi that since the new product in development will revolutionize how the industry does business, it should be presented in the light of innovation. However, in the case of seeking financing for R&D projects, innovative or otherwise, securing financing through financial intermediaries is not always easy.
Over-financing – excessive borrowing to finance your business can result in higher interest rates and tougher repayment schedules and this can lead to cash flow challenges. Over-trading – when a business sells over and above its capability on credit, it results to loans or overdrafts to finance the transactions. If the customers do not pay on time, cash flow problem occurs. Over-investment – often times, a company may be tempted to utilise available cash for investment; purchase vehicles, machinery, premises, and other assets. Too much investment in assets and failure to budget for the future can cause a business to run out of cash and consequently, fail to finance