Sher-Wood Case
While outsourcing provides numerous advantages for companies such as low cost production, outsourcing has proven to have numerous disadvantages for hockey companies who have outsourced the production of their equipment abroad. These include:
Global Sourcing Disadvantages
Make it difficult for companies to coordinate divisions amongst groups within companies
Differences in cultures will make it difficult for people to communicate
Distance requires additional training
Quality Inconsistency
Reduce domestic employment = tarnish image
More difficult to manage exchange rates and labor costs
OUTSOURCING:
The company had to work closely with the Chines partner – sent their experts to China so they could be trained about the production requirements.
Though they had concerns about raising Chinese labor costs and exchange rates, it was still relatively cheaper
Shipping to and from China is expensive
No product personalization due to large volume production
Negative market perception as hockey isn’t a Chinese sport, yet products manufactured there
CHALLENGE:
Boost sales by improving quality and lowering prices – to do this they are faced with the questions of whether they should move manufacturing of remaining sticks to China also?
Some issues they will face are:
Move additional equipment to China which is costly
Send over additional experts which is also costly
What would happen to the 40 affected employees?
It would be more advantageous from a cost reduction perspective for the company to stay move the production of all hockey sticks to China. They would be able control the quality of the sticks while producing it for much less. This will allow merchants to have a higher profit margin and will also allow consumers to pay much but receive a premium quality stick.
If this occurs the company must be willing to accept that they will then serve a new consumer market. As a significant number of hockey players are Canadian, they will likely prefer to
Global Sourcing Disadvantages
Make it difficult for companies to coordinate divisions amongst groups within companies
Differences in cultures will make it difficult for people to communicate
Distance requires additional training
Quality Inconsistency
Reduce domestic employment = tarnish image
More difficult to manage exchange rates and labor costs
OUTSOURCING:
The company had to work closely with the Chines partner – sent their experts to China so they could be trained about the production requirements.
Though they had concerns about raising Chinese labor costs and exchange rates, it was still relatively cheaper
Shipping to and from China is expensive
No product personalization due to large volume production
Negative market perception as hockey isn’t a Chinese sport, yet products manufactured there
CHALLENGE:
Boost sales by improving quality and lowering prices – to do this they are faced with the questions of whether they should move manufacturing of remaining sticks to China also?
Some issues they will face are:
Move additional equipment to China which is costly
Send over additional experts which is also costly
What would happen to the 40 affected employees?
It would be more advantageous from a cost reduction perspective for the company to stay move the production of all hockey sticks to China. They would be able control the quality of the sticks while producing it for much less. This will allow merchants to have a higher profit margin and will also allow consumers to pay much but receive a premium quality stick.
If this occurs the company must be willing to accept that they will then serve a new consumer market. As a significant number of hockey players are Canadian, they will likely prefer to