Outsourcing Retail Partner: A Big Issue for Home Appliance Manufacturers in China

Outsourcing Retail Partner: A Big Issue for Home Appliance Manufacturers in China

Introduction

Home Appliance manufacturers in china have made great progress accompany the fast development of the consumption of home appliance in the whole nation. There are many native home appliances manufacturers and foreign manufacturers especially those who come from Japan and South Korea, contest for this huge market. The competition among them is extremely scorching.

To occupy the market, techniques, finance and management are undoubt tools for competing. However, the difference of those three elements among the manufactures become less and less. So another field was focused by those manufacturers and many issues arose. That is retailer. It is very difficult for those manufactures to compete with so many competitors in this big country by only their own branch representatives. Outsourcing retailer become absolutely important. However, common retailers canÐŽ¦t help too much. What they need are outsourcing retail partner who keep stable relationship and supply long term retail service to them. The benefits of outsourcing retail partners are obvious but how to outsource is quite complicate and is the main issue will be discussed.

Literature review

1. What is outsourcingÐŽGThe definition of outsourcing

1. The process of transferring the responsibility for a specific business function from a employee group to a non-employee group (Zhiwei, Kathy, Joseph, 2001)

2. The outsource could be defined as a service outside the company acting as an extension of the companyÐŽ¦s business but responsible for its own management, while outsourcing could be defined as employing an outside agency to manage a function formerly carried on inside a company (Rothery and Robertson, 1995)

3. A transfer of an administrative responsibility to an outside organization, an arrangement that changes both service delivery and internal staffing patterns. Contracts with consulting firms, however, are also viewed by some as a form of outsourcing, particularly when close ties develop in long-term relationships.(Johnson and Cox, 1997)

Others describe outsourcing as ÐŽ§the practice of handling over the planning, management and operation of certain functions to an independent third partyЎЁ (Auerbach, 1996). ÐŽ§Finding new suppliers and new ways to secure the delivery of raw materials, goods components and services, by utilizing the knowledge, experience and creativity of new suppliers not used previously (Thames, 1994)

2. The benefits of outsourcing a supply partner

To know the reason why the home appliance manufactures need to outsource retail partner. As Partner outsourcing is only a part of outsourcing, we need to find benefits or advantage gained from outsourcing and we can see all the benefits of partner outsourcing from there.

Johnson (1997) gave some reason for outsourcing:

Ñ"Ь Improve company focus:

Outsourcing lets the company focus on boarder issues, while having operational details assumed by an outside expert.

Ñ"Ь Access to world-class capabilities

Outsourcing providers can bring extensive world-wide, world ÐŽVclass capability to meet the needs of their customers.

Ñ"Ь Accelerate re-engineering benefits

Outsourcing is, in effect, the management tool-business re-engineering process

Ñ"Ь Share risks

An organization can share risks in investment with the outside service providers

Johnson (1997) also indicates that outsourcing can

Ñ"Ь Free resources for other purposes

Ñ"Ь Make capital funs available.

Ñ"Ь Reduces and control operating costs

Lonsdale and Cox (1998) also pointed that outsourcing can convert fixed costs to variable benefit from a supplierÐŽ¦s investment and innovation. WhatÐŽ¦s more, Latimer (1994) think outsourcing also considerably improves the speed at which a firm can get its product to market.

The key objectives of partnership outsourcing are: minimise total costs, obtain competitive advantage and maximise product & service development (Crocker 2004). Obviously, they can be achieved from the benefits by undertaking the process of outsourcing.

3. Make a decision

Although there are plenty of benefits of outsourcing, not all firms need outsourcing. A firm not only need know the benefits, but also need to know if the firm need outsourcing partner (Frost, 2000)

The first step is to determine the strengths ad weaknesses of the organization seeking a partner. The strengths are the qualities which that organization can contribute to the relationship; the weaknesses are those qualities which should be offset by the strengths of a partner. When seeking a partner with the appropriate qualities, it is important to assess how these qualities will develop over time. Partnering is a long term relationship and there is little point in selecting partners whose strengths are not likely to endure ad improve (Auerbach 1996).

4. How to outsource a supply partner

To implement the process of outsourcing, there are many different method and steps, but many of them concern the similar contain as Soliman (2003) , Anthony (2004) and Embleton (1998) suggest that outsourcing at least should has three steps:

Ñ"Ь Strategic analyse

Ñ"Ь Supplier selection and

Ñ"Ь Relationship management

4.1 Strategic analyse

To establish analyse, two models can be the tool to clarify the position of the both side between customer and supplier.

Firstly, the KraljicÐŽ¦s (1983) model is widely used for customer to clarify the position of themselves. The model can also expound the relationship between customer and supplier. The service or products that the customer needs to outsource can be clarified into four kinds of positions by KraljicÐŽ¦s matrix.

Ñžâ„-. Customer Positoning

Critical: For these items, only one source of supply is available. (Crocker, 2004). Any