Outsourcing- ↑flexibility, focus on core competencies, deve comp advantage. Increasing rapidly.
Can enable: leveraging of supplier’s expertise, ↑in innovation. Results in: lower staffing levels, ↓costs, ↑flexibility. Strategic- Not outsourced: an item that is critical to success of product. Item requiring specizd design, mfging skills or equip. item that fits well w/in firm’s core comp. Make or Buy Tactical- poor supplier perf, changing sales demand, restricted mfging capability, mod of product, ↑mfging capability, imp. supplier capability. Favor Making: cost considerations, desire to integrate plant ops, use of excess plant capacity, control over prod and/or qlty, design secrecy reqrd, unreliable suppliers, desire to keep stable work force. Elements in Make Cost Analysis: delivered purchased material costs, direct labor costs, +costs from qlty & related probs, +inv carrying costs, +factory OH costs, +managerial costs, +costs of capital. Favor Buying: limited prod facilities, cost consids (less expensive), small-vol reqrmnts, suppliers specialized know-how, stable work force, multiple-source policy, indirect mngrial control consids, procurement & inv. consids. Elements in Buy Costs Analysis: purch price of part, transport costs, rec’ing & inspection costs, +purch costs, added costs related to qlty or service. Cost Consids: Time (short-term- focus on direct measurable costs. Long- measures hidden costs like storage, inspect, tooling, qlty, etc) Capacity (fixed costs issue if need to ↑ capacity). Other factors influencing: prod requirements, quality require, business process outsourcing issues (can speed up innovative change, orgs can outsource entire functions, secrecy issues), Tech Risk & Maturity, unreliable suppliers, supplier’s speclzd knowhow, small vol’s, limited facilities, workforce stability, multiple-source policy, mangrial control consids, procurement inv consds (paperwork). Dangers of outsourcing: loss of; control, client focus,...
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