Edinburgh Napier University

  On‐site outsourcing can be an effective strategy for organizations but operational performance may be temporarily hindered and recovery from this can take many months.
This study explores an instance of outsourcing in an aerospace maintenance and repair operation (MRO) in South Wales, where the inbound materials handling and warehousing (IMHW) function has been wholly outsourced to a third‐party organization. In this respect the study is novel and sheds new light on the operational performance benefits of outsourcing.
The host organization, located in South Wales, employs over 1000 staff and its annual turnover is in excess of £1 billion. The outsourcing organization is a provider of workforce solutions to organizations in aviation, defense, government, and technology sectors. After outsourcing the IMHW function, the host organization’s staff were retained and re‐employed in other areas of the facility.
Specifically, this study provides a quantitative analysis of the IMHW function, comparing the throughput and accuracy of the function before and after outsourcing. The analysis is made based on data extracted from the host organization’s management information system (MIS), spanning the 13 months prior to, and 16 months post, the function being outsourced.
Using trend analysis, correlation, and linear regression analysis it finds that on‐site outsourcing can deliver comparable operational performance, in terms of IMHW functional throughput and accuracy, to the host organization, and therefore be an effective strategy for organizations wishing to focus upon core competencies.
It also highlights that operational performance can be severely hindered following functional outsourcing and that recovery from this can take many months. It postulates that preparation for functional handover, especially in the form of training and tacit knowledge exchange between host and outsourcing employees, requires careful planning to minimize disruptions and maximize operational benefits.
The literature section begins by exploring the trends in outsourcing research and practice, identifying the changing reasons for organizations to engage in outsourcing functions and activities. This is followed by a discussion of the different forms that outsourcing may take, and then an examination of the importance and difficulties of measuring outsourcing performance. The aims and context of the study are presented next, followed by the presentation of the methodology that this study adopts. Finally, the results of the analysis are presented, along with a discussion of the main findings, before the conclusions to the study are drawn.