The increasing globalisation leads to tougher competition caused by various options that come along such as outsourcing production to Asia. The success of a company depends on its ability to stay competitive compared to other companies. Outsourcing production to Asia includes high amount of planning to have an equal set-up level as in Sweden. Therefore, the development of a long-term strategy is recommended. However, most manufacturing SMEs do not formulate a long-term strategy but act mainly on a day-to-day basis. This Master’s thesis examines the influence of outsourcing production on the performance objectives in a manufacturing SME context. Thus, reasons on which outsourcing decisions in manufacturing SMEs can be based on are investigated. Further, it was studied if outsourcing had effects on manufacturing SMEs performance objectives. This examination should support the awareness of the interdependence of outsourcing on the performance objectives, i.e. quality, flexibility, speed, dependability and cost. This recommends a long-term strategy to successfully outsource production.

The Master’s thesis consists of an extensive literature review to create the context of the topic and is supported by two case studies. These case studies took place in form of interviews in two manufacturing SMEs in Sweden that already outsourced the production. The literature presents several reasons that motivate a company to outsource its production, whereas there are only few findings regarding the effects of the process on the company’s performance objectives. Empirical data indicate that SMEs mainly reasoned their decisions on the cost savings. Whereas the main reason was one-sided, the effects the companies had to deal with were manifold. It showed that focussing only on cost might lead the company to unforeseen situations that need to be addressed and can prolong a process or increase the costs.