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Chapter 18 - Sourcing professional services. Chapter 18 focuses on sourcing professional services. The service sector has taken on an increasingly important role in the world economy. The service sector has become the engine of growth for the American economy, fundamental to the health and prosperity U.S. businesses, large, medium, or small. | Sourcing Professional Services Chapter 18 Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 1 The Growth of the Service Sector In the U.S. economy, Service Sector More than 85 percent of the total jobs Two-thirds of U.S. gross domestic product and non-farm private-sector employment (U.S. Department of Commerce, 2012) About 80 percent of U.S. economic growth. Service organization include financial services, health care communications, food insurance, transportation, utilities hospitality, entertainment Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 2 Service and the Expanding Global Markets Customers’ shrinking tolerance for less than full satisfaction in their services Factors Expanding competition Emerging technologies Improved communications Service organizations’ responses Increasing productivity and quality Decrease cost of service Purchasing and Supply Chain Management | Sourcing Professional Services Chapter 18 Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 1 The Growth of the Service Sector In the U.S. economy, Service Sector More than 85 percent of the total jobs Two-thirds of U.S. gross domestic product and non-farm private-sector employment (U.S. Department of Commerce, 2012) About 80 percent of U.S. economic growth. Service organization include financial services, health care communications, food insurance, transportation, utilities hospitality, entertainment Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 2 Service and the Expanding Global Markets Customers’ shrinking tolerance for less than full satisfaction in their services Factors Expanding competition Emerging technologies Improved communications Service organizations’ responses Increasing productivity and quality Decrease cost of service Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 3 Manufacturing-Like and Service More service sector firms are adopting traditionally manufacturing practices in their organizations Manufacturing and Service are not so different The service/manufacturing continuum Pure services Pure manufacturing Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 4 Service Sector’s Outsourcing Trends The two fastest growing outsourced service industries Information services Professional services High rate of failure to realize performance expectations from outsourcing 30–50% of outsourcing organizations The hidden costs of outsourcing The costs of outsourcing beyond simply supplier cost and profit Purchasing and Supply Chain Management 3rd edition, Copyright 2013 W. C. Benton Jr., All rights reserved 5 Example of a Poor IT Service Outsourcing Relationship Symptoms Severely missed milestones Operational disruptions at multiple .
