CASE 1: B&L INC.

Should Mr. Wilson proceed outsourcing manufacturing or not?

First, it was clearly stated that, in B&L Co., all departments working are independent on each
other for raw material and finished products. The outsourcing production of some process to
outside will make disturbance in production flow.
Even it is stated the Mayes are local manufacturer and will supply as much as quantity required
for production, it may make production flow ideal for waiting of the receipt of material from
Mayes.
The given for each trailer, it required 20 brackets so, considering annual production of trailers
of 40. It requires almost 800 brackets per year to fulfill the requirement for sales. So that, B&L
needs to maintain the sufficient inventory to support production. Thus, will increase
unnecessary holding cost of 20% for company.
The total fixed cost of the company containing brackets manufacturing process share to almost
20% which will not be recovered from save if some will be outsourced and burden of some may
be bare by other processes in the future which will make them expensive in future terms.
So, considering the above points it will be suggested, outsourcing manufacturing of outriggers
brackets to Mayes will not be good decision from future perspective and B&L Co. should be
manufacture same inhouse only.

CASE 2: RONDOT AUTOMOTIVE

What action the managers should do based on the report of Glenn?
The plant of Rondot Automotive in Jackson is facing difficulties in management, there is
pressure to lower costs and regain market share. Now let us consider the two alternatives in
term of cost saving and potential market share
The retaining of the wet-paint system
The cost for cleaning and painting operations are approximately 25¢ for each housing, showing
little potential saving if Rondot Automotive decide to upgrade this system. Plus, in near future,
the system will have gone modifications to meeting environmental regulations, and also, have
continued to be depreciated after 17 years in usage. Besides, the same painting method shows
no potential gain in market share.
Outsourcing to Greven E-Coat
The samples sent from Greven is promising: 5 out of 6 families of housings can be converted to
e-coating at a cost of 15¢ each, saving a portion of (25-15)/25 = 40% cost of painting the
housings, compared to the wet-paint system. In terms of economic aspects, this alternative is
preferred.
For potential gain in market share, the new technology of e-coating – if advertised effectively,
could help improve significantly the market share of Rondot Automotive, for its innovative
application of and the painting show similar quality to the wet-paint system. Although
outsourcing means being dependent on the outsider party of Greven, in the long run, there are
possibility for Rondot Automotive in Jackson plant to study, analyze and eventually take up the
technology of e-coating. They can also build up their own e-coating system, after years of
outsourcing to Greven, on the smaller ground area than that used for the wet-paint system.
This alternative has two requirements. The first is the adjustment of the adhesion method used
for the last family of housings, from cold-bond adhesion to hot-bond one, and this has high
chances of being effective as for the other 5 families of housings. The second is the shutting
down of the old painting system, and probably uninstallation and selling in salvage. Yet this is
not urgent and the wet-paint system could buffer the painting job in case of unexpected delay
from Greven.
Based on the report of Glenn, the managers of Rondot plant should flow his the outsourcing
option, for the sake of financial status of the plant and their share in the motor market,
accompanied with several potential innovation of painting system to not only the local Jackson
plant, but to the Rondot Worldwide as well. Here what the managers need to do:
- Form and carry out as soon as possible the contract of outsourcing painting to Greven E-
coating.
- Adjust the adhesion method used for the last family of housings, from cold-bond to hot-
bond, refilling the remained 40% of the Jackson plant’s housing volume.
- Cut off the operation rate of the wet-paint system once the outsourcing contract
become in use, plan for
- Maintain strict provision and quality control of the e-coated housings from Greven.
- Analyze and study the e-coat technology to ensure self-control in the future.

CASE 3. ALICIA WONG

Should the company manufacture mustard in-house?
We have:
Total cost of sourcing = Cost of Mustard per ltr + Freight cost per ltr + Handling cost per ltr +
Other overheads per ltr = $ 0.32/ltr + $ 0.04/ltr + $ 0.016/ltr + $ 0.02/ltr = $ 0.756 /ltr
Total cost of in-house = 60% x Landed Cost of spice blend + 20% x cost per ltr of Vinegar + 20% x
cost per ltr of Water + Labor and overheads (This is because mustard is prepared using 20%
vinegar and 20% water in addition to the spice blend @ 60%) = $ 0.15/ltr x 0.6 + $ 0.1875/ltr x
0.2 + $ 0.025/ltr x 0.2 + $ 0.105/ltr = $ 0.2375/ltr
The difference here is $ 0.756 /ltr - $ 0.2375/ltr = $ 0.5185/ltr.
Now multiply that to the number of liters TFL would order every month: $ 0.5185/ltr * 100.000
ltr = $51850/ month. The company would save almost $52000 every month if it chooses to
produce mustard in-house.
=> Hence we can confirm that it is feasible to make mustard in house and it is cheaper than
buying from outside sources.
Plus there are many advantages to switching to insourcing:
- The company will have better quality management now that it produces mustard on its
own. Given the fact that mustard is a very important materials for TFL’s products, being
able of personalizing it as well as controlling it can be a great plus.
- TFL values and intends to computerize its manufacturing process, therefore, with more
control when insourcing, TFL can use its past experience of applying technology as well
as help integrating this process successfully into its manufacturing chain. This can help
reduce cost, enhance information control, improve upgrading abilities, reduce failure
rates and so on. In the long run, the investment would be worth it.
- Importantly, the increase in flexibility means a reduction in dependency. This will result
in higher responsiveness within the market. TLF won’t have to rely on other suppliers,
reducing the risk that it might happen during the producing process. Also, if it needs for
emergency, it can always produce on its own.
- Plus, sourcing the raw materials such as mustard spice blend is easier given the fact that
it is very available in the market. Many suppliers are competing, hence lowering the
cost.
- Vinegar is already a raw material that TFL order in bulk. Ordering more for the making of
mustard would not be that much of a problem. Plus, the water is readily stably provided
by the city.
- Notice that TFL has a lot of labor, therefore choosing in-house producing would help use
up more of the workers’ existing time. It is said in the paper that TFL has both the time
and resources to help switch to in-house production.
 - In fact, workers are supporting the idea, acknowledging that the transition would help
the process turn out more smoothly given the fact that they would not have to haul and
rinse the bulky drums which can be quite an ineffective use of human labor.
- The inventory space used for storing the drums can now be used for other purposes.
Since the company can produce mustard and use mostly right away, there probably
won’t be as much need in storing a bunch of drums at the same time as earlier when it
has to order from the supplier.
- Additionally, it can definitely bring about some hardships. For example, more
investment cost, higher labor cost, harder to control and approve of quality, testing time
for spice blend, the quality might change, training needed for employees,…However,
these can totally be fixed with the right time, money, as well as commitment. Given the
possible long-term benefits, the choice of production transition is totally feasible and
worthy.
All in all, given its past normal approach to the production decision, in-house production of
mustard can definitely be done. It has invested more than $2mil in plant facilities, the bulk of it
being new, state of the art, process equipment and process control. Hence with the possible
advantages regarding optimization, cost reduction, labor efficiency, the company has all the
reasons to give it a try. This method can really be a significant boost for the TFL.