I than dispatching duties) to specialized companies, contracting large

I think outsourcing has a
negative connotation in the business world, for it is a word associated with
sacrificing quality for financial gain. For some, a move towards outsourcing is
also considered a sign of weakness in strategic management. For the purpose of
this post we can use our textbook’s definition of strategic outsourcing to mean
“moving one or more internal value chain activities outside the firm’s
boundaries to other firms in the industry value chain” and our textbook’s
definition of offshoring as occurring “when outsourced activities take place
outside the home country” (Rothaermel, 2017, p. 271). I work for Union Pacific Railroad
as a Train Dispatcher. Similar to an air traffic controller, train dispatchers
constantly monitor train movement and conditions affecting their movement,
taking immediate action when necessary.


As a Train Dispatcher, I use
state-of-the-art technology to monitor and control the movement of trains
throughout Union Pacific’s 23-state rail network. I am in constant
communication with field employees to ensure efficient operations. I am
responsible for the coordination and management of safe and efficient train
operations. I monitor radio and telephone communications with other Train
Dispatchers, train and engine crews, maintenance personnel, and others as
needed. I supervise train movement and operate computers for the proper routing
of trains across the network and on my territory. I also complete paperwork
required for train movements, track assignments and other critical events. As
such, I use radio communication to direct, control and monitor railroad train
traffic. This job requires quick interaction with many different levels of
management 24/7, no matter what time or day.

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Pros: For railroad companies,
outsourcing certain operations in this complex transportation industry to an
external specialist can be beneficial, allowing railroad companies to
concentrate on maximizing strengths without having to fixate over less critical
aspects of company operations. It is more common for railroad companies to
outsource railroad maintenance (rather than dispatching duties) to specialized companies,
contracting large portions of its maintenance infrastructure to a dedicated
partner in an effort to improve efficiency and cut costs. One case study I read
found the following: “Rail networks are generally spread over wide
geographically distant areas. It is expensive and complex for mining and other
big industries to install and manage these huge network services, as it needs
investment in infrastructure, experts and specialized facilities to provide the
services and carry out maintenance work. In such case, it is economical for the
industry to outsource the maintenance services for their rail network from
external agents instead of managing this service in-house.”


Cons: In the railroad industry, dispatching
requires seamless coordination between other Train Dispatchers, train and
engine crew, maintenance personnel and others as needed. Dispatching is such a
complex operation that many railroad companies shy away from the thought of
outsourcing day-to-day management of dispatching duties to an external company.

It is a safety-critical area in which handing control to an outsourcing partner
may pose as an enormous liability.  The potential pitfalls of outsourcing my job as a dispatcher range
from data protection and security issues to reduced flexibility and organizational
and managerial disarray, which are all detrimental.


As a strategic manager in the
railroad industry, I would say that train dispatching is a safety critical role
that doesn’t have much outsourcing or offshoring potential from a strategic
standpoint like IT services or banking, financial and accounting functions do.

I would be concerned not only with external factors like political backlash and
legal ramifications but internal factors as well like loss of managerial
control and the potential negative impact on operating efficiency and
compliance with US governmental safety regulations such as those set forth by
the Federal Railroad Administration (FRA).  But as the railroad industry continues to remain highly
profitable, maybe we will see a financially sound argument for outsourcing or
offshoring dispatcher related-duties from a strategic standpoint in the future.

As our textbook says, “services once thought to be immune to offshoring are
also experiencing vulnerability” (Rothaermel, 2017, p. 100).


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