Class Nov 30 Student - Nov. 30 In-sourcing / Outsourcing 1...

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1 Nov. 30 In-sourcing / Outsourcing
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2 Outsourcing Why do companies outsource? What advantages do they seek? What risks are they accepting?
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3 WHAT IS OUTSOURCING ? Contribution to Operations Contribution to Strategy Critical Differentiator Useful Commodity “ANYTHING WE COULD OR USED TO DO OURSELVES THAT SOMEONE ELSE NOW DOES”
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4 Core Competence Core competencies are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technology. Prahalad and Hamel, HBR, May, June, 1990 Honda – engines and power trains Canon – optics, imaging and microprocessot Phillips – optical-media Microsoft – desktop software and marketing Core competence - provides access to wide variety of markets - makes significant contribution to perceived customer benefits - is difficult for competitors to imitate
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5 WHY OUTSOURCE ? COST REDUCTION USUALLY GRABS THE HEADLINES, HOWEVER IT SHOULD NOT BE THE ONLY OR EVEN THE MOST IMPORTANT REASON Source: Kodak
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6 Goal of TCO is to understand Life Cycle Costs of item being purchased Make versus Buy Total Cost of Ownership (TCO) – The sum of all costs which accumulate to purchase, use and dispose of a product.
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7 Supplier A Supplier B 22 23 55 29 35 39 Purchase price Purchase price Transport costs Transport costs Storage and Usage Costs Sum = 100 Sum = 103 Storage and Usage Costs Lowest purchase price may not be Lowest TCO
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8 Price Costs for
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This note was uploaded on 02/08/2011 for the course BUSINESS S 29:630:301 taught by Professor Briangreczyn during the Spring '10 term at Rutgers.

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Class Nov 30 Student - Nov. 30 In-sourcing / Outsourcing 1...

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