Contracting out

Simply put, contracting out is one company purchasing goods or services from another company. This is very specific because the company informs its supplier exactly what it wants or how a service is to be performed. If in case the supplier does not perform its duties well, or the company finds another that would be of better service to them, the company may easily break ties with the supplier simply by breaking the contract.

For example, a company tells its supplier that it wants 300 pieces of Oak. The company would specify the exact weight and measurements of the wood, what should come with the wood, and how many people are to work on the said project.

Outsourcing

One of the most popular trends amongst companies nowadays is outsourcing. In this case, the company would turn the control over to the supplier as to how the operations would be done. The only concern of the buyer would be the end result. The buyer would not tell the supplier how to do the job because it would break the whole idea of outsourcing.

It would eliminate the supplier’s accountability on the end product because it wasn’t able to do it their way.  The reason that this is quite popular is that it usually is cheaper than the company doing it in-house. This is usually done by companies from developed countries and look for outsourced work abroad such as from China and India. An example scenario would be that a company wants 1,000 shoes produced by a supplier. The buyer would specify that it needs to be high quality and that it should cost cheaper than the calculated cost if the buyer did it themselves.

There are a lot more corporate terms that are often mixed up and it is important that companies are able to define them properly. In a highly competitive world where everything moves at such a fast pace, it is important that these things are not overlooked. It would be a very bad scenario if a company would lose millions just because of a single term. GP