Intelligent Manufacturing € February € 1997 € Vol. 3 € No. 2

Outsourcing Manufacturing Worth $8 Billion

Companies are spending more than $8 billion per year to outsource their manufacturing, according to the first quarterly Outsourcing Index, developed jointly by The Outsourcing Institute and Dun & Bradstreet Receivable Management Services. Overall, the index - measuring the use of external staff resources by companies - projects 35% outsourcing growth in the 12-month period ending June 1997, from $80 billion to $108 billion.

More than 50%, or $40 billion a year, of current outsourcing is concentrated in information technology, marketing and sales, and financial functions, such as banking, credit and collections, according to the Index. Information technology represents the largest single area of outsourcing, an estimated 22%, currently worth more than $17 billion. Finance, marketing and sales, and administration account for about 13 percent, or $10.4 billion annually. Manufacturing makes up 11%, or about $8 billion per year, of the total.

Additional key findings of the Index include:

• More than half of the organizations surveyed have increased their level of outsourcing in the past six months.
• Current users planning to expand outsourcing to additional functions within their company will account for approximately 75% of the expected increase.
• Approximately 15% of all functional areas within large companies use some outsourcing activity.