Outsourcing has become a vital strategic element in all kinds of organisations ranging from manufacturing to the service industry. Due to increasing trends a large number of organisations have adopted or are in a process of adopting outsourcing. Currently organisations practising outsourcing have a financial advantage over others. However, in due course, many others will join the race and may cause the organisations practicing outsourcing to lose their competitive advantage. The organisations, however, prepared to practice outsourcing effectively by continuous improvement will achieve enhanced performance. An effective way to incorporate a continuous improvement strategy into the outsourcing process is to integrate it with the lean system philosophy. This, however, is a complicated task. Over one hundred management tools have been listed that must be mastered to achieve the desired results (Bicheno, 2004). Despite this, different organisations are adopting various outsourcing models to acquire competitiveness (Brannemo, 2006). The selection of a suitable lean tool requires in depth understanding of the outsourcing process and strategies, by applying the lean philosophy to outsourcing, the final product cost can be reduced and the gap in the provider-consumer chain can be minimised by developing a continuous flow. In order to successfully implementing the Lean Outsourcing model, workforce training is essential. A survey (Fan, 2000) shows that organisations are outsourcing rather than focusing on price and other issues of the business. Instead of continuously improving the outsourcing programme by conventional means, it is advisable to develop and implement an integrated Lean Outsourcing model, so that continuous improvement becomes a part of the strategy. Realizing the importance of improving the outsourcing process, an attempt has been made in this paper to develop a model for integrating it with the Lean system. The objective of this paper is to present how the continuous improvement strategy can be incorporated into the outsourcing process by integrating it with the lean system. Furthermore, the aim is to analyse, how effectively this can be done to achieve an improved outsourcing model. The Lean Outsourcing model can be used as a base for building a continuously improving competitive sourcing decision model
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