Lecture 9

Question 1

Sourcing decisions in a asupply chain

Answer 1

Sourcing is the entire set of business processes required to purchase goods and services

For any supply chain, the most significant decisions is whether to outsource or perform it in-house

Question 2

Out-sourcing

Answer 2

Is about moving internal operations to a third-party, by e.g. selling a physical plant to a supplier, to buy back goods or services, or shifting an entire business division to a third-party and again buying the service back

Question 3

Off-shoring

Answer 3

Is primarily a geographic (re-location) of a part of a business operations from the firm´s home base to another country, often “overseas”

Question 4

Outsourcing - Expected benefits

Answer 4

The basic philosophy is to move transactional acitivites ti the (external) experts in order to:
- Give the organization the capacity to focus on its expertise
- Reduce investments and associated costs
- Increase flexibility
- Decrease production costs, since that supllier may be able to gather serveral customers and exploit economics of scale which all parties gain from

Question 5

Outsourcing - Possible down-sides

Answer 5

The organization loses control over a part of its business, its own capabilities and also over the reputation if the brand

Question 6

Off-shoring - Expected benefits

Answer 6

Offshoring takes advantage of cost differentials by relocating factories from costly countries, to countires with lower wages and less restricted labor regulations but sometimes also due to other strategic reasons, such as closeness to certain consumer markets, suppliers or important infrastructure

Question 7

Off-Shoring - Remarks and possible down-sides

Answer 7

Advocates argue that off-shoring to low-cost countries can stimulate wealth in some of the world´s poorest countries and provide jobs for those who are in the deepest need of aid

Meanwhile others criticize above arguments and instead consider offshoring a “device to exploit some of the world´s most vulnerable populations”, sice e.g. workers from such countries have no substantial lega protection

Question 8

Near-shoring

Answer 8

Refers to a geographic (re-location) of a part of a business operations from the firm´s home base to another country, often rather close

Example, A swedish manufacturer serving customers e.g. in Scandinavia would locate parts of its operations to Poland.

Question 9

A framework for low-cost sourcing assessment

Answer 9

Characteristics of low-cost-country supply chains are typically associated with
- Long geographiv distances
- Increased delivery times
- Decreased delivery precision
- Differences in culture, language, practices and time zones

which may result in
- Increased costs in terms of expedited freight
- Unfulfilled demands
- Extrea inventory and/or need for additional local suppliers