Central Stores versus Outsourcing Analysis
Devry University Online
PROJ410/Contracts and Procurement
Central Stores versus Outsourcing
1213 Lincoln Parkway
Lexington, Massachusetts, 02421
To offset the changing trends of fierce competition, flattened sales, and decreased profits the following analysis will provide the Corporate Cost Reduction Team members with the needed resources and recommendations to make an informed decision in the corporate overhead reduction program. Outsourcing is a hot topic in corporate America. Companies have begun to look at outsourcing of non-core materials and services to achieve substantial cost reductions …show more content…
Five potential outsourcing services have made general proposals, which if chosen, would reduce both expenditures and overhead for Futronics, Inc. Each of the five companies’ offer sample catalogues, price lists, and ranges of cost for delivery/volume configurations.
• 600 item specially printed catalogue in unique binder • 9% of current catalogue items would be available at lower cost • Promised savings would be about 6% • Order cycle would be a 10 day turn around including specialty letterheads • Special preprinted order forms for most common items • Deliveries made directly to secretaries • Reduction of labor and facility cost of Central Stores
• Loss or reduced control over the entire outsourcing process • Questions of outsource firms profit margin, granting them greater mass buying power. • Loss of current low price of transparencies, which is an important item to Futronics. The additional cost would be 16 to 23 dollars higher. • Futronics, Inc. would be locked into a three-year contract. • Severance packages for laid off employees from Central Stores • Retraining of current employees of Central Stores if necessary. • Negative public perception e.g. laying off a physically handicap worker.
While each of the benefits and the concerns are valid in their own right it is important to consider the worst features of in