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Financial Impact of Outsourcing Landscaping Functions

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With this data I need to find out:
1) The one year financial impact of outsourcing the grounds maintenance
2) How will savings in the second year differ from year one
3) Find qualitative factors that should be considered in the decision whether or not to outsource.

Here is the data for this problem:
College A is considering outsourcing their groundskeeping. They have been given a bid from Groundskeeper Willie for $250,000 per year, with the claim that he will keep the school grounds in the same condition they are in now. College A's maintenance costs for the previous year was $267,000 and is as follows:

Salary of gardeners: $185,000
Plant Materials: $65,000
Fertilizer: $5,000
Fuel: $4,000
Depreciation: $8,000
Total: $267,000

Should College A decide to go with Groundskeeper Willie's bid, they will lay off their gardeners and be able to sell equipment for $20,000.

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Here are your answers:

1. One year financial impact:
Before the deal. they would have a net outflow of $267,000
After the deal. they would have a net inflow of $270,000

Bid from outsourcer = $250,000
Sale of equipment = $20.000
Total inflow = $270,000

Note: I am assuming that the outsourcer would then ...

See Also This Related BrainMass Solution

Difference between Offshoring and Partnering (7-1)


A recent report by Watson Wyatt (2006) found that offshoring may have positive effects on production costs and operational efficiency, but there is minimal evidence of positive effects on customer service, satisfaction, human resources costs, marketplace image, and home country morale. Of major interest in this unit is another finding that showed that over 92 percent of the managers are local hires and that 39 percent approached their initial relocation with a third party. In addition, 79 percent of the respondents cited labor cost savings as the formal measure of their offshoring effectiveness.

In this task:

Prepare a one-page review for an industry executive, which recommends a set of standards for developing relationships with the host countries by answering these questions:

- Put these findings together and assess whether you think they support a strong relationship between the corporation and its workforce.

- Do you think they give you any hints about what should be the criteria for measuring a sustainable relationship? Explain.

- Is cost savings alone the answer in business effectiveness? How so or how not?

In addition, consider the sub-industry you chose previously, (Coffee manufacturing: see attachment):

- What criteria would you draft for developing a sustainable relationship operating in a country outside of the U.S.?

- Are there any examples that support the findings presented in the Watson Wyatt report on offshoring?

- Are there any examples that refute the study's findings?

Watson Wyatt Worldwide. (2009). http://www.towerswatson.com/

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