Introduction: Supplier Relations Outsourcing Outsourcing is “an agreement

Introduction:

We are assigned to do research on public and private sectors by taking the
following points. In addition to that we have to compare and contrast each
components on public and private sectors.

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Outsourcing

1.     Insourcing

2.     Supplier Selection

3.     Cost Management

4.     Ethics

5.     Law

6.     Pricing

7.     Supplier Relations

 

Outsourcing

 

Outsourcing is “an agreement in which one company
contracts-out a part of their existing internal activity to another company.

Public
sector: A popular example of public-sector outsourcing is
education. The empirical evidence on public-sector outsourcing of education
services is quite positive: competition can lead to higher-quality education
and more efficient use of resources. This finding has been demonstrated in
diverse settings.

Private
sector: The effects of private provision of schooling on
educational outcomes have been studied for Chile, for the creation of
autonomous grant-maintained schools in the UK, and for the effect of
private-school competition on public-sector schools in Milwaukee in the US.
Metropolitan areas with more choice among public schools have been found to
have more productive public schools, which reduces demand for private
schooling. A voucher system introduced in Sweden in 1992 paid the entire cost
of attending private or “independent” schools, thus introducing competition
into school choice. To minimize the possibility of adverse effects on
public-sector schools, student selection could not be based on ability or socio-economic
background, but only on such factors as proximity to the school and position on
a waiting list. Before the reform, just 1% of children attended private
schools; by 2012, 25.6% of students attended private or independent secondary
schools, and 12.6% attended private or independent primary schools. In line
with previous studies, analysis shows that the increase in the share of independent
schools led to an increase in educational achievement at the end of compulsory
schooling and raised the probability of students going to university. Several
robustness checks made possible by the richness of the data confirm that there
are no confounding effects of differential grade inflation and no omitted variables,
such as a correlation between characteristics of a certain municipality and the
probability of having a higher or lower share of independent schools. Increased
competition might lead to cost minimization, but it could also increase the
costs per student for schools losing students. However, the productivity
analysis showed no evidence of increased costs per student, indicating that the
positive effect of the reform on performance came from the increased
productivity induced by competition. Private sector maximizes its profit by
minimizing fixed costs while public sector can maximize its capacities
providing public services and benefits, to which citizens have the right, by
expanding availability of the services and benefits and their value. What is
more, both sectors use the model of outsourcing with a view to increasing value
added to the services aimed at final consumer. Support of particular functions
such as application processing development and contact making significantly increases
quality of the services.

 

Insourcing
Insourcing is
the commencement of performing a business function that could be contracted out
internally. Insourcing is widely used in production to reduce costs of taxes, labor and transportation.

Insourcing is also defined as bringing a third party outsourcer
to work inside a company’s facility. For example, an IT outsourcing provider may be hired to service a
company’s IT department while working inside the company’s facilities. In
addition to contracting an entire team of workers from an outsourcing provider,
outside experts are sometimes hired as consultants and the internal staff
thereafter implements their recommendations. It may also refer to bringing
in foreign nationals to do jobs at lower wages.

Public Sector: Insourcing
also includes a company assigning a project, be it services, R or
manufacturing, to a subsidiary or to another company that is within the same
country of the company’s location; this is also referred to as
“Outsourcing”. However, the term Outsourcing usually refers to a
project that was being performed in-house but now will be performed by another
company; either within or outside the company’s country. Whereas, Insourcing
can be any project that is required by the company to meet its needs; the
project is not necessarily being performed in-house. Insourcing also includes
the “reshoring” of projects when a company brings home projects that are
performed in another country and now will be performed in the company’s
country; either inside or outside the company.

Private Sector: During 2012 the US manufacturing tide began turning. Two
lead articles  in The Atlantic, Dec. 2012, explain why.
Rising third-world wages, recognition that many off-shoring costs were large
and hidden, rapid consumer product innovation and shrinking design/manufacture
to market times, reduced manufacturing costs flowing from integrating skilled
workers into the product design teams (dramatically cutting assembly times and
complexity), increasing overseas fuel and transportation costs, falling energy
costs in the US, increasing US labor productivity, and union flexibility. The
list is long and growing.

 

Supplier Selection:

Supplier selection is the process by which firms
identify, evaluate, and contract with suppliers. The supplier selection process
deploys a tremendous amount of a firm’s financial resources. In return, firms
expect significant benefits from contracting with suppliers offering high
value.

Public
Sector: Sollish and Semanik (2006) mentioned that the
suppliers are essential for the organization to provide the needed resources in
order to achieve satisfactory results. Once the suppliers are chosen to be a part
of well-managed supply chain, it will have a lasting effect on the competitiveness
of the whole supply chain (Choi and Hartley, 1996). Sollish and Semanik (2010)
further pointed out that the supply risk management is a complicated business activity
and it is a fundamental factor in supplier selection. In addition, an
appropriate supplier selection must be conducted systematically by using the
most objective criteria that the company is able to develop. According to Choi
and Hartley (1996) selecting the supplier based on the potential for a
long-term relationship has a high rate which means it is very important for the
firm. Furthermore, developing long-term and close supplier relationship are now
critical for procurement decisions. Moreover, concerning the relationship
between the supplier and the buyer, the supplier’s main goal is to reach the
desired returns with maximized chance of being selected. While the buyer’s main
goal is to find a proper supplier selection process that can reach the right
information in the right details to be able to choose between the competing
suppliers (Seshadri, 2005). However, Handfield, et al. (2009) argued that there
is no certain ways for supplier selection and according to that, the
organizations can use a variety of many different methods. Moreover, the level
of the needed effort for the supplier selection depends on the importance

Of the required goods or service both listed and
non-listed companies have more latitude to use a customized sourcing process
that suits their industry and their organization. They are not bound by the
requirement to spend a given budget in a defined financial year and are
therefore free to schedule their buying process to suit business cycles.

Private
Sector: Private companies wishing to be seen as ethical and
honest adopt what is accepted internationally as best practice. One area where
they may not achieve this fully is in the providing details of evaluation
criteria and weightings to prospective bidders. This is standard practice in
government and generally regarded as the fairest and most transparent way to
award contracts. Private companies are often reluctant to disclose their
weightings in advance. Selecting a list of bidders to be involved in the tender
process is not subject to any limitations so private companies can limit who
they send their documents to as they see fit. They are also not bound to
publicly publish details to whom the contract was awarded or even to formally
advise the unsuccessful bidders.

 

Managing and completing their tendering process in
less time than governments is really achievable when they are not bound by
tight rules. Price negotiation between the sourcing company and short-listed
bidders is normal practice which is limited by certain protocols in government.

 

 

Private
Sector: the public sector is also averse to the use of cost
data or the type of financial tools used in the private sector.in truth, it is often
more difficult to quantify results in the public sector than in the private
sector.it is harder, for example, to quantify the benefits of long term
outcomes of school programs than it is to measure increased sales related to a
private sector project.

 

Ethics

Public Sector: Ethics in the public
sector is a broad topic that is usually considered a branch of political
ethics. In the public sector, ethics addresses the fundamental premise of a
public administrator’s duty as a “steward” to the public. In other
words, it is the moral justification and consideration for decisions and actions
made during the completion of daily duties when working to provide the general
services of government and nonprofit organizations. Ethics is defined as, among
others, the entirety of rules of proper moral conduct corresponding to the
ideology of a particular society or organization (Eduard). Public sector ethics
is a broad topic because values and morals vary between cultures. Despite the
differences in ethical values, there is a growing common ground of what is
considered good conduct and correct conduct with ethics.1 Ethics are an
accountability standard by which the public will scrutinize the work being
conducted by the members of these organizations. The question of ethics emerges
in the public sector on account of its subordinate character.

 

Decisions are based upon ethical principles, which are
the perception of what the general public would view as correct. Ensuring the
ethical behavior in the public sector requires a permanent reflection on the
decisions taken and their impact from a moral point of view on citizens. Having
such a distinction ensures that public administrators are not acting on an
internal set of ethical principles without first questioning whether those
principles would hold to public scrutiny. It also has placed an additional burden
upon public administrators regarding the conduct of their personal lives.
Public sector ethics is an attempt to create a more open atmosphere within
governmental operations.

 

 

The public sector is the part of an economy in which
goods and services are produced and/or (re)distributed by government agencies.
Examples are state educational systems and unemployment insurance. Civil
servants working for government entities are public sector employees, whereas
those employed by private employers not affiliated with government are private
sector employees.

 

Private
Sector: Sometimes the private sector works in coordination
with the public sector. By partnering with the private sector through
arrangements which leverage governmental assets and resources, opportunities
are provided for the privates sector to participate in the development,
financing, ownership and operation of a public facility or service. For
example, a public/private partnership could be an arrangement whereby a
contractor or third party develops and operates a system which is beneficial to
a government agency and others and charges the cost of the service to users.

 

Law

Private
Sector: Private law is that part of a civil law legal system
which is part of the jus commune that involves relationships between
individuals, such as the law of contracts or torts1 (as it is called in the
common law), and the law of obligations (as it is called in civil legal
systems). It is to be distinguished from public law, which deals with
relationships between both natural and artificial persons (i.e., organizations)
and the state, including regulatory statutes, penal law and other law that
affects the public order. In general terms, private law involves interactions
between private citizens, whereas public law involves interrelations between
the state and the general population

 

Pricing:

Public
Sector: The pricing in private and public
enterprise differs primarily on the supply side. In the long run, private
enterprises must cover total costs and provide an adequate return necessary to
attract venture capital. In contrast, extra-commercial considerations may
influence pricing in public enterprises. They may incur losses in the public interest under
explicit directives from the government.

A number of theories of pricing in public
enterprises have been put forward. Most important of these are: (1) marginal
cost of production theory; (2) no profit, no loss theory; (3) average cost of
production theory; (4) theory of making profits. All these theories suffer from
a number of weaknesses and none of them taken individually is a satisfactory
guide for determining the prices of the products of public enterprises.

Private Sector: On carbon pricing, private sector
shows the way Especially in carbon-intensive sectors, such as oil
and gas and electric utilities, firms are anticipating what they view as the
inevitable policy action: a federal carbon tax or cap-and-trade system.
Companies like Nexen and TransAlta are using “carbon shadow pricing” in their
strategic planning and project finance to help guide decision-making on
capital-intensive projects such as power plants or upgrading refining
facilities.
Federal action to design a simple and
cost-effective policy that sends clear price signals to all Canadian firms and
households is long overdue. The further the private sector gets ahead of the
government on this issue, the less credible the political argument that
Canadians don’t really support a sensible climate change policy.
Before proceeding, an important myth needs to be
slain. Too often we hear the claim that climate change policies need not impose
a cost on economic growth. This is not so. Any sensible economic modelling that
has been done on this issue shows that even the most efficient policies with
teeth would slow down the growth rate of our gross domestic product (although
growth would continue).

 

Supplier
relations

Public Sector: The public sector is faced with a
growing and diverse range of independent providers of public services.
Traditional procurement frequently assumes an arm’s length approach, whereby
services are purchased and managed through a
tightly specified service contract. But many public services are
there to address messy problems – services that are intimately
involved in people’s lives, such as mental health, problem families, housing
and long term unemployment. This complexity requires a more agile and
flexible approach to service delivery, based on the development of long
term partnerships, or Supplier Relationship Management (SRM).Toyota is famed
for its tightly knit group of suppliers and its long-term, collaborative
approach to supplier relations, or keiretsu.   It
operates a system of shared values and work philosophy across a tightly knit
supplier network, an approach that has been adopted by many other organizations,
with varying degrees of success. What are the key characteristics of this
approach and what modifications need to be made for it to succeed in the public
sector.

 

Private Sector: The adversarial
and partnership view, Kraljic (1983) and Bensaou (2000) stressed that no single
approach to relationship management is inherently superior, successful supply
chain management requires the efficient management of a portfolio of
relationships. Bensaou (2000) even goes further with his analysis saying that
every company, when deciding which Mandiyambira 309 relationship style to
adopt, should consider three factors: the product exchanged and its technology,
the competitive conditions in the upstream market, and the capabilities of the
suppliers available. In this regard Webster?s (1992) notes that each company
needs to assess each of their suppliers and decide if a supply alliance would
be appropriate or not. Smart and Harrison (2003) cites that the best purchasing
strategy depends on the circumstances, such that a competitive strategy of
playing suppliers against one another in one situation will achieve the lowest
price, whereas another situation calls for a collaborative strategy that
emphasizes partnership relations to guarantee the same outcome. According to
Dwyer et al. (1987) the buyer-seller relationship portfolio is situated on the
axis between two extremes, namely, discrete transaction and vertical
integration, such that the strength of a relation-ship depends on environmental
effects and competitive market. Dwyer et al. (1987) further notes that supply
alliances, today seem to be the best way to do business, they are not suitable
for every company and its market place. An article by Zineldin and Philipson
(2007) provides a research of marketing practices in the contemporary
environment which was done in 1997 by Brodie et al. (1997) in the University of
Auckland in New Zealand. The results did not support the concept of a total
“paradigm shift” that is the movement away from adversarial approach to
collaborations with suppliers. Instead, the findings in several companies
confirmed that the transaction marketing is still relevant and currently used
with some types of relationship marketing. Brodie et al. (1997) quoted in
Zineldin and Philipson (2007), concluded that the importance of transactional
marketing should be recognized and estimated, their study’s results contradict
the trend of academics and practitioners of the so-called relationship
marketing “paradigm shift”.

 

 

 

Contrasting

Outsourcing:

Public:
Incompetent and overstaffed. Lots of public servants on good pay, counting down
the days to an early and very prosperous retirement on a gold plated
pension. 

Private:
Incompetent and understaffed. Most of the work done offshore by other even less
motivated and trained staff on 3rd World wages. UK staff stretched and
undervalued. Executives and directors paid 6 and 7 figure salaries. Lots of
offshore tax avoidance on the huge profits by massive outsourcing corporations.

 

Insourcing:

Public: By having employees of your own company or
anyone from the outside temporarily working for you in your building, you will
be able to better manage and probe them under your watchful eye. At this rate,
the quality of projects and services can be more appropriate as the company
intends it to be.

 

Private: The reality of
business is that not every movement of every client is predictable and
sometimes you have to put out fires. In the event that something goes wrong,
and you need to call an emergency meeting with your team, it’s a lot easier if
you are all in the same building. Rather than waiting on the schedule of a
remote employee, you can walk to the desk of each key player, and bring them
into the conference room.

 

Supplier selection:

Public: Public sector is highly regulated and sometime
can be seen as inflexible

 

Private: Private sector are more flexible and open to
innovations; they are profit and people driven.

 

Ethics:

Public: social
achievement outcomes and cost effectiveness

Private: The worth of all benefits and rights arriving
from ownership

 

Supplier relations:
Public: The public sector is faced
with a growing and diverse range of independent providers of public services.

Private: Every
business in the private sector – is dependent on materials and services
supplied by other businesses. As no business is self-sufficient, it can be
concluded that sound relationships in the supply chain are vital

Conclusion:

The aim was to compare and contrast

1.      Outsourcing

2.     Insourcing

3.     Supplier Selection

4.     Cost Management

5.     Ethics

6.     Law

7.     Pricing

8.     Supplier Relations

On both the private and public sectors. By concluding,
we have compared and contrasted the data and submitted.

 

 

 

 

 

 

REFERENCE:

https://www.purchasing-procurement-center.com/tender-process.html

http://www.civil-taiwan.org/chart-int1law.htm

https://en.wikipedia.org/wiki/Public_sector_ethics

https://en.wikipedia.org/wiki/Insourcing

https://studentshare.net/finance-accounting/593728-compare-and-contrast-the-key-features-of-public-and-private-sector-organisations-and-explain-how-these-might-impact-on-the-role-of-the-accountant-working-within-either-sector

 

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