Re: The Difference between Outsourcing and Subcontracting?
These definitions are from the APICS (Association for Operations Management) dictionary:
Outsourcing : The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution—the replacement of internal capacity and production by that of the supplier. See: subcontracting.
Subcontracting: Sending production work outside to another manufacturer. See: outsourcing.
Wayne
Without ever having noted the above definition before, I have no quibble with the "subcontracting" definition. Essentially, outsourcing is the same in my mind as straight purchasing.
"Subcontracting" in my mind entails oversight and responsibility for the work of the subcontractor an organization hires to do work. The simplest analogy is a general contractor building a single family house who takes responsibility for monitoring and approving the work of subcontractors doing carpentry, plumbing, electrical, etc. and who directs how and when the work shall be done.
Outsourcing seems more to me like only approving a finished product or service and its delivery date.
In my machining business, I
outsourced plating services instead of ever setting up a plating capacity, but I
subcontracted some machine shops to do work our shop would normally do instead of increasing my own capacity for a one-time special order. As part of that, I or my senior leads would supply the raw stock, oversee the machine setup/tooling and first article inspection and assure in-process inspection followed our procedures and work instructions as if the subcontractor's shop were an extension of our own.
Added in edit:
In effect, my subcontracting was akin to RENTING machines, operators, and space to run them.