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Identify and explain two key performance indicators that Turbo Motors could use to determine the success of their outsourcing policy. - VCE - SSCE Business Management - Question 2 - 2004 - Paper 1
Question 2
Identify and explain two key performance indicators that Turbo Motors could use to determine the success of their outsourcing policy.
Worked Solution & Example Answer:Identify and explain two key performance indicators that Turbo Motors could use to determine the success of their outsourcing policy. - VCE - SSCE Business Management - Question 2 - 2004 - Paper 1
Step 1
Key Performance Indicator 1: Financial Performance
Answer
One of the primary indicators to assess the success of Turbo Motors' outsourcing policy is financial performance. This involves evaluating the cost savings achieved through outsourcing compared to maintaining in-house operations. Turbo Motors can measure this by comparing the total costs incurred in both scenarios over a specific period. A successful outsourcing strategy should ideally lead to a reduction in operational costs, positively impacting profit margins. Furthermore, financial KPIs like return on investment (ROI) can also be utilized to gauge the effectiveness of the outsourced services.
Step 2
Key Performance Indicator 2: On-time Completion
Answer
Another crucial performance indicator is on-time completion of outsourced tasks. Turbo Motors should track the timelines of project deliverables and compare them against established deadlines. Delegate tasks to external providers is effective only if they can reliably meet deadlines. Maintaining data on the percentage of projects completed on time will help assess the efficiency and reliability of outsourcing relationships. A high on-time completion rate reflects positively on the effectiveness of the outsourcing strategy.