1 Executive Summary
The summary includes a concise but complete description of the problem addressed in this paper, how we propose to solve it as well as recommendations.
1.1 Problem Statement
FlexCon is making an effort to redefine itself by gaining a better understanding of strategic insourcing/outsourcing alternatives. This includes focusing not only on cost factors, but also the true sense of what the core competences of the organization are, and whether the product/service under consideration is an integral part of the core competences. Therefore, the company has elected to conduct an internal review in order to decide where product development efforts and strategic investment should focus. During the internal review of the company, Executive Management noted that too much capacity and talent are being allocated to simple, commodity type items, which are providing minimal product differentiation in the market place.
FlexCon is a $3 billion maker of small industrial engines that has been manufacturing high quality pistons for fifty years. As demand for a broader line of products has increased over the years, FlexCon has responded by broadening the product line and currently produces three different kinds of pistons. Currently the company is producing pistons in-house that are considered to be simple, commodity type pistons and that provide no product differentiation in the market place. The critical components and subassemblies that make a major difference in the performance and cost of the finished product are currently outsourced to external suppliers.
1.3 The desired outcome
After conclusion of this business case it should be clear how to link insourcing/outsourcing decisions to strategic corporate requirements, including the need to define core competencies. Furthermore the qualitative and quantitative considerations associated with insourcing/outsourcing decisions should be recognized. Moreover a total cost analysis has been...