Class 17 - Sourcing Decisions - Chapter 10

Class 17 - Sourcing Decisions - Chapter 10 - BUS 370:...

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BUS 370: Sourcing Decisions Chapter 10 Donavon Favre College of Management North Carolina State University
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Chapter Objectives Be able to: Discuss the various strategic issues surrounding sourcing decisions and identify some of the key factors favoring one approach over the other. Perform a simple total cost analysis. Explain what a sourcing strategy is, and show how portfolio analysis can be used to identify the appropriate sourcing strategy for a particular good or service. Show how multicriteria decision models can be used to evaluate suppliers, and interpret the results. Discuss some of the longer-term trends in supply management and why they are important.
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Introduction The sourcing decision Sourcing strategies Supplier evaluation Trends in supply management
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Sourcing decisions – High level, often strategic decisions regarding which products or services will be provided internally and which will be provided by external supply-chain partners Purchasing – discussed in Chapter 11 The activities associated with identifying needs, locating and selecting suppliers, negotiating terms, and following up to ensure supplier performance Sourcing decisions and purchasing activities serve to link a company with its supply chain partners Focus
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Insourcing – The use of resources within the firm to provide products or services Outsourcing – The use of supply chain partners to provide products or services Sourcing decisions are high-level, often strategic decisions that address: Do we use resources within the firm or will the material or service be provided by supply chain partners? The Sourcing Decision Make-or-Buy Decision
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Would you outsource any of the following?: Dell – Manufacture of computer components Nike – Manufacturing of shoes Intel – Design of computer chips IBM – Cafeteria Services Why?
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Advantages and Disadvantages of Insourcing Advantages High degree of control Ability to oversee the entire program Economies of scale and/or scope Disadvantages Required strategic flexibility Required high investment Loss of access to superior products and services offered by potential suppliers
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Advantages and Disadvantages of Outsourcing Advantages High strategic flexibility Low investment risk Improved cash flow Access to state-of-the-art products and services Disadvantages Possibility of choosing a bad supplier Loss of control over the process and core technologies Communication and coordination challenges “Hollowing out” of the corporation
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Factors Affecting the Decision to Insource or Outsource Environmental uncertainty
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Class 17 - Sourcing Decisions - Chapter 10 - BUS 370:...

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