Cost Reduction Analysis

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Futronics – Cost Reduction Analysis
As playing the part of Steve, I would first like to thank you for the opportunity to take on this important task that will help to shape the future here at Futronics. This analysis will bring you the different benefits for outsourcing weighed against those for maintaining our current central stores. It will also, in turn, provide you with the disadvantages for each option. We can first start with the option of outsourcing. We have collected proposals from five different companies who are willing to take on our requirements for cost reduction by way of outsourcing our tasks to them. Some of the benefits to outsourcing are illustrated below in a general outlined table. Futronics Central Store| Issue| Outsourcing|

500| Items on Hand| 600|
Delivered to dock or receiving area| Delivery| Delivered to Secretaries’ desk| Must wait on dock to process order and then deliver it to secretaries| Expedition Time| There is no wait from the dock as the outsourced company will deliver to secretaries’ desk| There is a considerable amount of paperwork as well as management required to run the receiving area| Paperwork and Management| No management required and less paperwork associated with the reception of products| We will remain obligated to pay for our workers working the receiving area| Labor Cost| Will no longer have to pay salaries of dock workers as work is outsourced to an outside company| Will still require the space and equipment needed to properly operate the receiving area| Facility Maintenance| No longer required to maintain a facility or equipment. These tasks will be allocated to the outsourced company|

After viewing some of the key points to our dilemma, it is now time to look at some benefits to maintaining our central stores and keeping the system that have in place currently. This will again be illustrated in the table below. Futronics Central Store| Issue| Outsourcing|

Still maintain a...
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