A corporation decides to turn over much of the responsibility for production to independent suppliers. This practice is known as

• A. Insourcing
• B. Outsourcing
• C. Nearshoring
• D. Offshoring

Answer: (B)

The main idea being tested is outsourcing. When a corporation turns over much of the responsibility for production to independent suppliers, it is contracting those activities out to external firms rather than performing them in-house. This arrangement is typically pursued to reduce costs, gain access to specialized capabilities, and increase flexibility so the company can focus on its core strengths. It differs from insourcing, which would mean bringing those production activities back inside the company. It also differs from nearshoring or offshoring, which describe where the work is located relative to the company—nearshoring favors nearby suppliers, while offshoring moves production to distant locations; the scenario emphasizes external suppliers in general, which is the essence of outsourcing.