Insourcing/outsourcing

The pressure to reduce cost, shorter cycle times, political changes, more focus on ROI/ROA, and improved software and simulation tools are driving more companies to consider outsourcing. Insourcing/outsourcing decisions occur when a company wants to expand its product, benefit from supplier efficiencies, or reduce cost. This type of decision is often called a 'make or buy' decision because it involves a decision of whether to continue 'making' a product versus buying it from an outside company. Information regarding the decision should be considered thoroughly. Internally, the strategy of the company and the costs analysis will make this decision more clear, unclosing some future considerations. Externally, the information regarding to the industry development, the market research, in addition, supplier’s strategy and development also needed to be included.

If there are changes in demand for a product, a company may choose to outsource to minimize fluctuations in staffing. Companies also outsource to reduce workload on employees or to provide more development opportunities for their employees by freeing them from tedious tasks. Some companies outsource to eliminate distractions and force themselves to concentrate on their core competencies. Some outsource to achieve greater financial flexibility by improving cash flow. Performing a cost analysis is the easiest and quickest approach to making these types of decisions. The analysis is based on the difference in the cost of buying a product from an external supplier compared to the cost of producing the item internally. Flexcon has concluded that in attempts to preserve jobs, it has insourced parts that are easy to manufacture and outsourced those that are complex. However producing commodities is adding little to what customers consider important. The company has become dependent on suppliers for critical components and subassemblies that make a major difference in the performance and cost of finished products. Flexcon is considering outsourcing pistons part of the company’s R series of engines and will dedicate