Question

What decisions must a company make for certain products to be outsourced and others to be made domestically and why?

Answer 1

The company needs to evaluate following point before taking a decision if products need to be outsourced or made domestically

Increased Effeciency - You can outsource certain products if any outsourcing company has expertise in it and this will increase the efficiency. Company can make the products domestically wherver it has expertise which is not available with outsourced companies.

Cheap labor cost - If products doesn't require any specific skills and can be done anywhere then ideally they should be outsource in low cost countries to get the benefits of cheap labor. However, if they require specific skills and company believes outsourcing could impact the quality of product then they should be made domestically.

Increased speed - Most of the outsourced companies work 24*7 to cater all timezones and this increases the speed. If speed helps in fulfilling demand then those products could be considered for outsourcing

Focus on core areas - Company should focus on making things in house where it has core competency and everything else should be outsourced to the company who are specialist in it