You are the CEO of a manufacturing company. You manufacture all the parts needed to make a small range of products, but you have lacked investment over the past few years. A new contract from a major retailer offers you the opportunity to expand your output, but your production manager tells you that the equipment will not be able to cope. You need to invest at least half the amount that the whole contract is worth, and your factory would be working for 18 months just to pay for the new machinery. You could instead buy all of the parts from a number of overseas suppliers and convert the factory into an assembly plant at a fraction of the cost.
1. Suggest two good reasons why you should still manufacture.
2. What are the implications of taking the outsourcing route instead of manufacturing?
3. Why is outsourcing abroad considered a lower-risk option compared to running a manufacturing facility?