What does 'outsourcing' mean in the context of operations?

Outsourcing refers to the practice of hiring third-party firms to handle business activities that were previously performed in-house. This approach allows companies to leverage external expertise and resources, often leading to cost savings, increased efficiency, and the ability to focus on core business activities. By transferring certain functions, such as customer service, accounting, or manufacturing, to specialized providers, businesses can improve their flexibility and scalability, enabling them to respond more effectively to market demands and changes.

The other choices may touch on related concepts but do not accurately capture the essence of outsourcing. For example, transferring all operations to a single vendor represents a more extreme and less common approach than outsourcing, which typically involves a variety of vendors for different functions. Similarly, while workforce reduction might occur as a result of outsourcing, it is not the defining characteristic of the practice. Lastly, integrating operations with supply chain partners emphasizes collaboration rather than the external delegation of tasks, which further distinguishes outsourcing from these other practices.