Rubberteech Case

Therefore, manufacturers face a trade-off between gain from the efficient technology and loss from paying the information rent. When a firm decides on in-house production instead of outsourcing, although a manufacturer can obtain the entire profit, it loses the gain from the cost efficiency of outsourcing. When outsourcing is selected, although a manufacturer can acquire the gain from cost efficiency, it is required to share the gain with the outsourcer.

The corporation might be excited to find they are utilizing the First-Mover Advantage by moving into an emerging market to set up shop (Kokemuller, n.d.). The company may even anticipate building success by becoming a recognized brand in the industry but there is risk that this can back fire and a second corporation may come in and steal that anticipated success through better innovation and even cheaper product and labor. In addition, the country that is manufacturing the product could decide to make a similar product forcing the other country out.

1. No Language Barrier: Communication with your suppliers would be much easier if you’re manufacturing in the United States. There would be no language barrier, no cultural conflict, and overall much easier

The last, often unaddressed issue, of outsourcing and displaced American employees is that of the overpriced employee. The public has become complacent in the fact that no one else will compete for jobs. Unions have overpriced their employees driving the company to look elsewhere for suitable replacements. This attitude of inherent job protection from outside sources has actually drove companies to outsource.

As a business evolves and grows continuous improvement becomes a necessity for continued prosperity. As a consequence, cost cutting becomes a necessity. Most firms evaluate production practices and look to bolster efficiency by integrating new technology. In this case Mr. Bury already has a relatively low overhead; however, with the acquisition of additional human resources he can facilitate the development of new technologies that will enrich his product line and possibly increase the market to include foreign trade. At this point, outsourcing would also present itself as a reasonable option. This alternative would lower fixed costs while only creating a docile increase in variable expenses. This would be an attractive approach to increasing production while simultaneously reducing per unit costs. Moreover, Will could negotiate

This is no different for the world of procurement and supply management when it comes to overseas suppliers. Businesses need to be aware of the possible communication barriers, international laws, regulations and even customers. The costs that may come with being able to export and import the items being made overseas can become a huge money and time pit. This could cause the savings being had by making the items overseas to quickly disappear. Quality of items is also a possible disadvantage that can come from making products overseas. In a lot of cases of overseas manufacturing follows the trend that you get what you pay for, low price means low quality. More of the luxury types of companies are beginning to bring their business back to the United States according to Schmidt (2016) because they are starting to realize that cheaper is not always

For instance, a business could think that outsourcing is an amazing way to save money. That may be so, but it is possible for there to be hidden fees. Increased shipping fees in addition to taxes will surely defeat the company’s purpose of saving money (The Risks and Benefits of Outsourcing Supply Chain Management).

Cost is a very integral part of accounting and finance for a business. Usually a product or service can be produced or completed at a lower price while achieving the ideal quality measures and standards. Outsourcing services in some business departments such as IT and finance could greatly reduce operating costs savings which will greatly impact the bottom line. Specialization is another key business process in which outsourcing can play a key role. A large percent of businesses products or processes are specialized and outsourcing to another provider could initiate higher quality. Flexibility is another benefit of outsourcing. Flexibility offers the company the benefit of only paying for the service that is integral for operations management. For example, a company could outsource a part of the finance department that handles payroll. Instead of paying an employee full time to

Many people imagine only enormous Fortune 500 companies as moving production and jobs overseas. However, in today's weakened economy, even smaller businesses are now opting for outsourcing more and more to keep costs low. Even smaller companies have to deal with complex issues that are normally thought to be dealt with by larger Fortune 500 companies. Yet, despite benefits, there are also high risks involved in outsourcing, risks that go far beyond the boundary of the single organization in questions.

* Better management of the outsourced activity – In theory, you can choose a supplier that is a leader in the field

Outsourcing production refers to the contracting and subcontracting of manufacturing activities to occupy labor, time, money and facilities which give business a competitive edge. It is regularly a vital part of reengineering and downscaling. There will have various strengths that businesses could contract out such as designing, data processing,

The importance of including an outsourcing strategy in the overall firm's operations has become increasingly important over the last decade. Companies in the U.S. pay about $68 billion every year to other companies for outsourced services and although a major part of these contracts succeed, there is an increasing concern due to recent broken deals. A recent study shows that 80% of companies that outsource their customer based functions are failing to meet their cost savings targets. Usually companies fail to budget hidden outsourcing costs such as customer dissatisfaction that can eventually

The reason for the popularity of outsourcing is that it allows many companies to reduce the overall service costs, particularly the labour costs, be close some of their customers together with the combination of environmental pressure, efficiency and competitive pressure (Tate et al. 2009; Frattochi et al 2014; Hutzel and Lippert 2014). As a consequence, when these advantages are no more exist, many manufacturing firms in developed countries have started to shift their business strategies from offshoring and outsourcing and reshoring.

There are two types of strategies for foreign locations, a centralized location from which a facility can serve the world market and a decentralized location where facilities are set up in various regional or national locations close to major markets. A centralized location is chosen when there is a substantial difference among various countries in manufacturing costs due to each country’s costs, political economy, and culture. It’s preferred when trade barriers are low, exchange rates are expected to remain stable, the product’s value-to-weight ratio is high, and the product serves universal needs. If the production technology used by the firm has high fixed costs and high minimum efficient scale relative to global demand they can benefit from a centralized location. Centralizing is also favored when externalities arise from the concentration of like enterprises that favor certain locations. Conversely, decentralization is preferred when trade barriers are high, location externalities aren’t important, exchange rates are volatile, the product’s value-to-weight ratio is low, and the product does not serve universal needs. If production technology has low fixed costs, low minimum efficient scale and flexible manufacturing technology is not available, decentralizing is favored. Decentralization is also chosen if manufacturing costs in various countries are not substantially impacted by differences in factor costs, political economy, and culture.

Regardless of reason, moving into a foreign market tends to portend great opportunities for companies, particularly if it entails serving products in an emerging economy that has recently become wealthy enough to afford such products; or selling a new but needed