Outsourcing Debacle: A Case Study of Artic Engineering & Technical Services

Abstract

Third party service provider (3PSP) enables companies to deliver product in a right quantity, right quality, right price in a right time and at right place to its worthy customers, thereby influence strategic objectives in a chain. The growing outsourcing business trend not only enhances company's profit but motivates 3PSP to venture. However, the fate of 3PSP relies to a very large extent on the outsourcing attitude and philosophy of the companies. Artic Engineering & Technical services (AETS), a Vadodara based, 3PSP used to cater to the demand of the machined components to an original equipment manufacturer (OEM) in Vadodara and some other manufacturers in the neighbouring area. AETS grew in a short span of time due its service regularity, and knowledge management ability. Over a period of time, the client of AETS started facing problem of product functioning because of design and other technical snag. Quality issues and competitors' pressure brought the outsourcing policy under a review. The management's revised policy of compulsory audit of infrastructural assessment to fix the quality problems, brought AETS under fire as its business model was based on the concept of Hollow Corporation. AETS's closely adopted the 'designer role' by offering technical service without actually investing in manufacturing and process technology. As a result, AETS suffered a set back and couldn't meet the revised expectation of MNC. This case attempts to identify how the change in management philosophy results into outsourcing debacle and influence upcoming 3PSP. It also demonstrates the vices in the use of Hollow Corporation.