ANS\VER THE FOLLO\VIN G:

• Jack Sn1ith, O\Vner of Jack's Auto Sa1es,is deciding \vhether his company should process its O\
Vn auto loan applications or outsource the process to Loans Etc.If Jack processes the auto loan
applications interna1ly. he faces atl annual fixed cost of $2500 for membership fees.allo,ving
him acc-ess to the Topnotch credit conlpany, and a variable cost of $25 each tinle he processes a
loan application.Loans Etc. ""iU processtheloans for $35 per application, butJack n1ust
leaseequipment from Loans Etc.at a fixed annual cost of $1000. Jack estintates processing 125
loan .applications per year.\Vhat do you think jack should do?
(a) Should Jack process the loans internally or outsource the loans if deLnand is e'Pected to be
125 loan applications?
(b) ls Jack indifferent to interna.1 processing and outsourcing at one level of loan applications?

• Claudia Programs Technologies Inc.,has narro\ved choices of outsourcing provider to nvo

firms located in differentcotu1tries. Program v.•ants to decide \\fltich one of the t\vo
countries is the better choice, based on the risk avoidance criteria.She has polled her
executives and established four criteria.The resulting ratings for the nvo coun tries are
presented inthe table belov.',\Vhere 1is a lower risk and 3 is a higl1er risk.
a. U sing the ut1\veighted factor-ra ring n1ethod.\Vhich cotu1t1y v;ould you select?
b. if the first nvo factors (price and nean1ess) are given a \Veight of 2,and the last nvo
factors (technology and history) are given a \Veight of 1,ho\V does the ansv;er change?
Selection Critetion England Canada
Price of sel"\'ice front outsourcer 2 3

N earness of facilities to client 3 1

Leve) of technology 1 3
History of sttccessfu) outsourcing 1 2