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advantages and disadvantages of outsourcing labor

Question One:
Discuss the advantages and disadvantages of outsourcing labor or component parts in the production process.

Question Two:
The theory of constraints can identify bottlenecks. How does one go about identifying and managing bottlenecks?

Question Three:
Net present value and internal rate of return are two methods that allow for explicit consideration of the time value of money. What is the difference between the discount rate used for net present value computations and the internal rate of return? Explain your answer.

Question Four:
Contrast the advantages and disadvantages of centralization vs. decentralization.

Question Five:
Explain what ISO 9000 is and is not.

Solution Preview

Question One:
Discuss the advantages and disadvantages of outsourcing labor or component parts in the production process.

Krajewski and Ritzman (2002) define outsourcing as "allotting work to suppliers and distributors to provide needed services and materials and to perform those processes that the organization does not perform itself." While such a definition is easy to comprehend, knowing when and how to outsource is much more complex. When thinking about outsourcing, modern businesses must consider not only functions traditionally outsourced but also their rapidly evolving information technology (IT) requirements.
Advantages of outsourcing:
? Reduce capital investment: Supplier reaps the benefit of higher demand to pay for capital and aggregation of demand to smooth uncertainty.
? Focus on Core Competency: buyer is able to focus on its core strength (its talents, skills, and knowledge that differentiate it from its competitors and give it an advantage)
? Increased Flexibility:
Ability to better reacts to changes in customer demand
? May be cost efficient

Disadvantages:
? It has relatively less control on delivery and quality. It may not have the benefits of economies of scale.
? Loss of Competitive Knowledge: may open up the opportunity for competitors. New designs can only be introduced based upon supplier's agenda - not buyers.

Question Two:
The theory of constraints can identify bottlenecks. How does one go about identifying and managing bottlenecks?

The Theory of Constraints of Eliyahu Goldratt is a model that is the practical result of Eli Goldratt's work on "how to think". The Theory of Constraints (TOC) is an overall philosophy developed by Dr. Eliyahu M. Goldratt, usually applied to running and improving an organization. TOC consists of Problem Solving and Management/Decision-Making Tools called the Thinking Processes (TP).

In a number of books, Goldratt described certain thinking processes and their applications. Theory of Constraints is concerned with "Identification of Constraints & Bottlenecks" which will help management to improve the profitability of ...

Solution Summary

The solution discusses the advantages and disadvantages of outsourcing labor.

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