This business must decide whether to establish a factory to make a component or to contract the manufacturing to an independent supplier. There are advantages and disadvantages of each of these options. The option this business should take would be to contract the manufacturing to an independent supplier due to it being more efficient and better in the long term.
Establishing a factory has many advantages and disadvantages. Some advantages of establishing a factory include: * Factories provide work opportunities * Factory will benefit from cheap labour * Having your own factory means extra cash flow * Establishing your own factory means most of the profit will go to the owner of the factory * Easier to keep an eye on component being created and employees.
Disadvantages of establishing a factory includes: * Factory causes pollution which is a danger to the environment and people. * Factories produce a lot of wastes * Overpopulation is likely in City areas. * Component could take long to appeal to population due to independent factory. * Expensive * Time consuming
These are some advantages and disadvantages of establishing a factory to make a component.
There are many advantages and disadvantages of contracting the manufacturing to an independent supplier. Some advantages include: * Lower Costs * Flexibility * Access to outside expertise in selling the component * Lower capital requirements * No need to produce anything
Disadvantages of contracting the manufacturing to an independent supplier: * If the company were to get involved in the wrong company, the whole process will not work. * The company engaging in the contract with the manufacturer may assume too much * The…