Outsourcing Case - Vice President for Human Resource at Busco

As Vice President for Human Resource at Busco I have been tasked with being in charge of benefits management. Currently health care costs have been significantly increasing. In addition to rising health care there has been an increase in cost of raw materials. This state has only added frustration to Busco with minimizing operations costs. Additionally, there has been pressure from upper management to reduce costs of health care. Essentially these dilemmas will create a problem with the request of union representation. Unions typically try and increase benefits as opposed to minimize costs/benefits and increase membership/ benefit eligibility instead of trying to outsource work to reduce the relative costs associated allocating full benefits to eligible workers.

Currently as mentioned before the main concerns of management is reducing the amount of money spent on health care costs and reducing operations costs relative to acquiring raw materials. Essentially this amounts to management to outsource labor to reduce raw material/operating costs that will lead to a cost effective way to determine health care cut backs. In order to understand the various elements of outsourcing it will be necessary to understand the benefits that are achieved through this process. Outsourcing consists of a company such as Busco who contracts with another company to perform various duties that would typically be completed by someone who works internally (Thompson, 2009). Contrary to popular thought outsourcing much more than cost saving strategies. According to All Business (2009) companies that invest wisely into outsourcing enables them to control capital costs; companies can essentially convert fixed costs into variable costs. This in turn would allow the company to invest and generate more capital ultimately making Busco more attractive to clients. In addition, it will allow Busco to increase efficiency by hiring outside contractors that specialize in specific operations which equated to minimizing the costs passed on to the customer. This will enable Busco to increase revenue and invest into their health care plans. Additionally, outsourcing saves money on labor costs. Traditional strategies of training employees for short term projects can be distributed to outside parties that specialize in certain areas while allowing Busco to focus on allocating personnel to activities where there needed the most.

An example of this can be seen at Home Depot. Essentially one of Home Depots biggest challenges according to John Castellani president of Business Roundtable who represents Home Depot speculated the health care was one economic challenge that seems to be coming out of control for both employers and employees. (McGarah, 2009). In order to circumvent the common occurrence of having to increase the amount of money contributed to health care benefits, Home Depot, started outsourcing labor to minimize additional costs at their distribution centers. Often times Home Depot experiences spikes in productivity. Instead of hiring full time staff, they use a temporary agency to handle the fluctuation in workloads. Essentially what this breaks down to is the company who contracts with Home Depot provides benefits to their employers who work full time. This enables Home Depot to convert fixed costs to variable costs during certain times of fluctuating workloads. This has saved them a minimum of 1,100 dollar