The Scottish Parliament Education and Culture Committee heard from academics, health and social work professionals and young people who had been in care, many said they were left at home too long.
In the final report the committee recognised the importance of the decision on whether or not to take a child into care.
It said there were complex legal, ethical and professional deliberations to be balanced but that getting it wrong can have fatal consequences
The report concluded: "We believe that the current decision-making processes are not always delivering the best outcomes for children and their families.
"Despite the enormous efforts being made across Scotland to bring about improvement, too many children have been left too long in an unsuitable home environment.
"Too few children move quickly enough into stable, loving homes and go on to enjoy the same life chances as other children."
The level of resources available to councils to manage the workload effectively was called into question. The committee recommended the Scottish Government sets out guidelines for professionals to follow and back it up with resources.
It did not see the need for the abolition of the current system or setting up of a new child welfare system but instead believed resources and staffing needed to be re-arranged.
The report stated: "It should seek to establish a shared vision of what success would look like for looked after children, and ensure that resources and processes are built around that vision."
Stewart Maxwell, committee convenor, said: "The evidence we heard from a range of witnesses, particularly from young people who have been in care, was often shocking. We were told about a 'merry-go-round of placements', where many children come into care but go home again only to suffer further abuse and neglect. This is simply appalling.
"There's no doubt that deciding whether or not to remove a child from the family home and into care is one of the hardest decisions to make. However, we believe current decision-making processes do not always deliver the best outcomes for children and families.