Assume you are the Chief Operations Officer of a manufacturing firm faced with t

Question

Assume you are the Chief Operations Officer of a manufacturing firm faced with the decision to outsource production. Based on your reading of the two articles below, state the advantages and disadvantages of outsourcing and your inclination to either outsource production or maintain plant production.

Problems with Offshore Production
https://online.national.edu/d2l/lor/viewer/view_private.d2l?ou=6606&loIdentId=2754

Outsourcing for Financial Success? An Exploratory Study

https://online.national.edu/d2l/lor/viewer/view_private.d2l?ou=6606&loIdentId=2753

Explanation / Answer

Advantages of outsourcing

1. Financial benefits - Significant amount of costs can be saved by outsourcing production. For example, employee compensation costs, costs associated with providing space for manufacturing setup, etc., can be saved and resources can be freed for other purposes. Moreover, the business would not require to make heavy investments in plants and equipments if manufacturing is outsourced.

2. Focus on core business - Outsourcing of non-core business processes and manufacturing provides an organization the time and opportunity to focus on its core business and expertise.

3. Improved quality of products - Quality of the products can be improved by outsourcing to organizations with more expertise and specialized processes. Moreover, vendors can be bound by contracts to provide certain level of quality.

Disadvantages of outsourcing

1. Loss of expertise - Organizations that outsource manufacturing lose on skills and know-how that are critical to long-term competitiveness.

2. Loss of control over costs - Once manufacturing is outsourced, the organization loses control over costs of the products sold by it. They have to go by with what the vendors are demading for it.

3. Dependence on vendors - Once manufacturing is outsourced, an organization becomes completely dependent on its suppliers for the delivery of the products. No delivery for the vendors means no sales, under this situation, the vendors' problems become problems of the organization.

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