What are the risks? Each has gotten into trouble 2001-Nike reported unexpected profit shortfalls due to inventory problems 2000-Cisco had to write down billions in obsolete inventory 1999-Apple was unable to meet customer demand for new products
What are the risks? Each has gotten into trouble 2001 – Nike reported unexpected profit shortfalls due to inventory problems 2000 – Cisco had to write down billions in obsolete inventory 1999 – Apple was unable to meet customer demand for new products
What Went Wrong? These problems uncover fundamental difficulties with outsourcing. Nike,Apple and Cisco represent industries: With short-life-cycle products -Where technologies change rapidly Uncertainty in customer demand is enormous Can these characteristics explain the problems that these companies are facing? Are there more fundamental principles that we should consider to determine whether or not to outsource?
What Went Wrong? These problems uncover fundamental difficulties with outsourcing. Nike, Apple and Cisco represent industries: With short-life-cycle products Where technologies change rapidly Uncertainty in customer demand is enormous Can these characteristics explain the problems that these companies are facing? Are there more fundamental principles that we should consider to determine whether or not to outsource?
Why Outsourcing? Throughout the 1990s,strategic outsourcing, that is,outsourcing the manufacturing of key components,was used as a tool to rapidly cut costs. Some of the motivations for outsourcing are: ■Economics of scale ■Risk pooling Reduce capital investment Focus on core competency Increased flexibility
Why Outsourcing? Throughout the 1990s, strategic outsourcing, that is, outsourcing the manufacturing of key components, was used as a tool to rapidly cut costs. Some of the motivations for outsourcing are: Economics of scale Risk pooling Reduce capital investment Focus on core competency Increased flexibility