5. What are the trade-offs between in-house production and outsourcing? How should locations be decided for...

5. What are the trade-offs between in-house production and outsourcing? How should locations be decided for in-house production or outsourcing?

Expert Solution

Answer
The trade-offs between production in house and outsourcing is that both of them have their own benefits. For example a company may prefer production in house if it has the required expertise in manufacturing that particular product. The second important factor which company must consider while having an in house production is that the company must have sufficient demand of the product in order to carry out its operating expense. On the other hand outsourcing is preferred by a company when it does not have the the required expertise to produce a product. In such a situation it may take order from the market and give the production responsibility to a third company which is expert in making the product and has the required manpower and expertise in making such products.
Location should be decided for in house production or outsourcing depending upon the following factors-
1.Availability of raw material needed to make the product. If the raw material is readily available to the production unit the location must be nearby the raw material availability.
2. The location for production unit must be such that the material produced could be easily transported easily and it must be on a a highway road.

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keosha answered 1 year ago

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