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CHAPTER I: Introduction
1.1 Background of the Study
The In sourcing and/or Outsourcing decision is referred to in purchasing as sourcing policy decision and it is one of the most important decision points for any organization because it has a multiple and web like effect on the life of the organization.
Managers of businesses most especially manufacturing organizations faces a series of important and determining questions which must be answered correctly if the organization is to succeed in midst of competition.
The Purchasing Manager must first address the question of which product or service best fits the needs of the organization and should the organization produce (make or insource) what is consumed or buy from outside suppliers? The questions arising from this is that, if they decide to buy from outside suppliers, will the organization buy from a single supplier (single source) or from several suppliers (multiple source); even when that is answered, the questions will still be, should we buy directly from manufacturers or use intermediaries or may be, the organization should both insource and outsource simultaneously.
However, before an organization can come to any decision as to whether to make what it consume in-house or to buy from outside suppliers (outsourced) several factors such as financial consideration, cost consideration, core competence consideration and a way they will have to be critically analyzed to see how they will affect the organization productivity.
Outsourcing therefore, is a purchasing policy where outside suppliers are engaged to supply an organization with its materials requirements.
Insourcing on this other hand signifies a situation where what the organization needs, it produces and consumes. Several factors as already indicated will need to be explained before an organization could come to any of these sourcing policy decisions. These shall be the fulcrum of this study.
1.2 Statement of the Problem
In an attempt to enhance their competitiveness, organizations are increasingly turning to outsourcing. The argument is that outsourcing is a way of achieving strategic goals, reduce cost, improve customers satisfaction and to provide other efficiencies and effectiveness (overall productivity).
However, NOCACO has long been using outsourcing in the realization of its needed materials, yet with the supposed advantages of outsourcing. The organization has experience a tremendous fall in productivity, cost of doing business has become almost exorbitant, quality has been falling and market shares and sales have also fallen.
Another issue that calls for concern is that, the organization has been using single sourcing policy which sometimes causes delays in the supply of necessary materials used for production. The question that emanates from these issues for this study is that, should the organization continue with the outsourcing policy and examine other factors or considers insourcing policy? Or should the organization insource and outsource at the same time?
1.3 Objective of the Study
The researched is aimed at setting the effect of insourcing or outsourcing decision on the productivity of Northern Cable Processing and Manufacturing Company (NOCACO) Kaduna.
The main objective is built around a number of specific objectives, among these are:
i) To determine the process the organization follow in outsourcing of contracts.
ii) To identify criteria for insourcing or outsourcing.
iii) To examine the benefits of insourcing or outsourcing.
iv) To identify the cost involved in Insourcing or outsourcing decision.
v) To determine the effect of insource and outsource on productivity.
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