What is the term for transferring a firm's activities to external suppliers?

Outsourcing refers to the strategic practice of transferring certain business functions or activities to external suppliers rather than handling them in-house. This approach allows firms to focus on their core competencies while leveraging the expertise and efficiencies of specialized service providers. By outsourcing, companies can also potentially reduce costs, increase flexibility, and enhance service quality, as external suppliers often have more experience and resources specific to the tasks they handle.

In contrast, insourcing involves performing activities internally, which may not provide the same benefits of cost reduction and efficiency as outsourcing can offer. Vertical integration implies that a company controls multiple stages of the supply chain, whether by acquiring suppliers (backward integration) or distributors (forward integration), but does not involve transferring activities to external entities. Supply chain integration focuses on aligning and coordinating the activities of all parties involved in the supply chain, which can include both internal functions and external partners but does not specifically mean outsourcing.

Thus, the most suitable term for transferring activities to external suppliers is outsourcing.