Outsourcing problem

case study Framework outsourcing
New answer on Mar 11, 2021
2 Answers
1.7 k Views
Anonymous A asked on Jun 27, 2019

Hi I was just found out a case where it was asking how to decide if outsourcing some parts of a train to china would be a good idea or not, being the client a major US train manufacturer.

I've came up with this framework or solution but not sure about it as it seems rather different to the usual ones:

1st watch out if the price will be lowered.

In order to see that I would look at the cost of manufacturing, fixed costs in order to develop the new supplier, transport cost, tariffs, quality checking cost and both interest rates and exchange rate.

2nd try to figure it out if it meets que quality standards

In order to do it having a rigurous analysis of the suppliers expertise, having quality controls and maybe watching for "prototypes" or any other tangible stuff that could prove their expertise.

3rd trying to understand the predictability of the supply chain

Here it would be a due dilligence about which problems may occur, the expected outcome, having an analysis of the process and lead times. Then analysing possible political issues (China vs US...) and finally deciding how much inventory should be increased (and its cost)

4th analysing other possible risks

In this case I was thinking about public image that could be damaged or maybe intellectual property being stolen (not sure if this would be seen as rude or a good point to check)

5th looking for better alternatives

Maybe looking for new local suppliers, acquiring a manufacturing company or starting a new one in a labour low cost country or renegotiating contracts.

What do you think about this approach, do you think it could be used or is it way too unconventional and those "questions" that I designed before what I am actually looking for may be seem as a waste of time or not structured enough?

Overview of answers

Upvotes
  • Upvotes
  • Date ascending
  • Date descending
Anonymous B replied on Mar 11, 2021

You took this from this video: https://www.youtube.com/watch?v=iPg7-NO97FU&t=5s (19:12). S you did not come up with this framework. My suggestion to you is to think through each problem what is important and from there make your framework, not taking from someone else and asking here wether or not it makes sence. If the objective of outsourcing is profit I think this makes sence, but you need to understand the objective and tailor your framework to that.

Was this answer helpful?
0
Gaurav
Expert
Content Creator
updated an answer on Mar 11, 2021
Ex-Mckinsey|Certified Career Coach |Placed 500+ candidates at MBB & other consultancies

Hi there,

It is clear that switching to outsourcing may be caused by a low budget but not necessarily. Sometimes outsourcing may be chosen not because of labour low cost in one or another country, but because of lack of qualification of your employees or of those employees you can currently afford. So, sometimes outsourcing also means better quality and bigger budget. In such cases, it’s always important to ask reversed questions because it’s necessary to find out what will happen if something goes wrong. Your questions in the section about unpredictable situations ( political issues, economic sanctions etc.) are truly noteworthy, but it is very important to draft all the scenarios, both good and bad, analysing all the risks more thoroughly and paying attention to those that are hardest to control. You are on the right track.

Hope it was helpful,
GB

(edited)

Was this answer helpful?