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Outsourcing an activity normally reduces the risk of under-utilising the resources used in undertaking the activity internally
This statement is true.
But I don’t understand. If I am outsourcing an activity, then I am not utilising the labor and resources that I would have used had I chosen to get the same activity done internally.
So , by outsourcing, I am increasing the risk that I will be under utilising the resources available to me.
Would you please help me understand how I am incorrect?
When you outsource, you are transferring the responsibility of that activity to an external provider who specialises in it. Allowing you to focus on core activities and strategic priorities, thereby optimising the use of your internal resources.
If you were to perform the activity internally, then there is a risk that your resources may not be fully utilised, if demand fluctuates or if the activity is not a core competency.
By outsourcing, you can avoid the costs associated with maintaining excess capacity for activities that may not be consistently needed, thus reducing the risk of under-utilisation.
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