Make or Buy and Sourcing. Case 5-3 Alicia Wong
An outsourcing decision is whether to buy a product or service from outside the company or produce it internally. Insource/outsource decisions play a vital role in the overall performance of an organization. This is especially true in recent managerial trends that advocate focusing on core competencies and outsourcing other activities in order to gain and retain competitiveness in a supply chain and business environments.
Insourcing or outsourcing decision compares the cost of producing a component or providing a service internally with the cost of purchasing the component or service from an external supplier.
To help you learn to make a real world make or buy decision, read Case 5-3 Alicia Wong
Alicia Wong has to consider many things before deciding whether Thain Foods Limited (TFL) should make the mustard in house or externally before presenting her proposal to the CEO of TFL.
From all that you read please respond to the following:
What else does Alicia need to consider? In other words, explain what some reasons are to make instead of buy or reasons for buying rather than make?
What benefits would accrue to TFL? What risks are there for TFL?
What should TFL do and why?
QUESTION 2 = (Comment )
Alicia needs to consider the 1) the managerial and technical expertise required to produce the mustard, 2) maintaining status quo with existing employees as it relates to additional effort/time spent, and 3) maintaining the pace of production across all products offered by TFL. These are other areas that should be given critical consideration, in addition to the quality assurance factor. Alicia states that making the mustard in-house would not require additional staff, however, it is not clear whether she considered the management and technical expertise required to complete the tasks. Second, while the existing employees may be excited about not having to deal with handling and cleaning a bulky drum, there would be more effort and training required in order to produce the same level of quality mustard as has been provided over the last thirty years. Lastly, introduction of this new process will have to be factored in with the remaining products produced by the company and the additional effort and management required to keep all products moving through production without interruption. For these reasons, I believe it could be a little risky to take on making the mustard in-house. The only benefit I see is the cost factor, as there was no mention of introducing a new and improved flavor or quality of the mustard. Therefore, I believe TFL should continue business as usual and work towards negotiating better disposal methods and possible lower cost per drum of mustard.
Needs Analysis – Please respond to the following:
This week we read Chapter Six and explored need criteria, categories of needs, repetitive or non-repetitive requirements, how to translate needs to commercial equivalents, early supply and supplier involvement, and standardization and simplification.
Since I am passionate about applying our learning to “real world” application:
Read Assignment 2: Performing Purchasing Agent Duties
List and define the methods of describing a need as it relates to your Week Eight written assignment, Part I: Need and Specification Identification. In other words, what are some of the important aspects to consider as you begin to develop the questions for your new client?
This is going to be the heart of developing a clear, concise and meaningful RFP, so let’s start you on your way!
QUESTION 4= (COMMENT )
Supply’s growing involvement in the acquisition of services may be explained by the high dollars spent on services and the opportunities to reduce costs. That is what Waters, Inc.’s new client has done when they have elected to outsource their call center operations to Water’s. The purpose of identifying the function of an item to be required is to assist in the determination of what represents acceptable value. Hence, thining about the questions that you, as the purchasing agent for Water’s Inc., will need to ask the new client are critical. You have to understand the needs of the client in order to formulate what you are going to include in your RFP for potential vendors to respond to.
Maybe a way to think of needs and requirements might be to consider that perhaps you want to outsource cleaning your house and what your needs and requirments might be. Understanding it from that perspective might help you to have the gowth mindset that allows you to develop those questions for your new client.