Q. Non-financial factors for non-financial considerations?

There are several non-financial factors which possibly relevant to a decision to contract out and the type of factors are likely to be dependent upon the process/service which is the subject of the decision. Amongst the most significant of the non-financial considerations will be the impact of any decision on the company's competitive position. For instance in the case of Amber plc if the on train catering facility is adequately high class it may attract new clientele to use their trains, thereby giving Amber plc a competitive advantage. The opposite may possibly as well be the case. In other sense the strategic impact of a decision requires to be taken into account in addition to the directly measurable financial effects.

Another factor which requires to be taken into account is the question of management control of service quality. Once a service go out of house the only control mechanism which rests with the purchasing company may be a variety of penalties the extreme one being termination of the contract. If the service stays inside the company it may be easier to change things in response to changing customer needs. In other sense contracting out may be linked to a reduction in the level of management control.

Staff morale perhaps affected by contracting out and any such effects need to be carefully considered. Staff in departments which remain in-house may perhaps begin to feel threatened and view their service as the next on the hit list for external contracting. It is significant for managers to help allay such fears and make clear the criteria on which any future outsourcing decisions will be based.

Other non-financial factors which perhaps useful to consider include

- Environmental effects such like changes in food packaging policies

- The terms of any contract for outside supply as well as the willingness of the supplier to respond to changes in market demand as and when necessary

- The potential of the business to manage the external supply process. If a huge number of contracts are in place this is able to possibly become a logistical headache.