The Economic Aspects of the BlueJay Manufacturing - Research Paper Example

? Economics of Exchange Introduction In its recent performances, BlueJay Manufacturing has been witnessing a rapidly augmenting demand for its newly introduced products. From an overall perspective, this particular aspect can be observed as quite expected and beneficial for the company’s growth. However, owing to its limitation in serving the boosting market demand effectively, BlueJay had to face certain problems in relation to its supply chain management strategies. With this concern, Fred Butler, the director of supply chain management of the firm was planning ways for improving BlueJay’s production capacity to suffice the surpassing product demand. Contextually, the Senior Leadership Team (SLT) had been focused on keeping the entire manufacturing process in-house, concerning which the management presumes that out-sourcing certain elements of its production system or rather its supply chain system shall be beneficial for the company to satisfy the augmenting demand. With due concern to the above mentioned aspects regarding the outsourcing initiatives of BlueJay, this essay would intend to present a workbook for weekly staff meetings which is intended to be held in the 30 days period of recommending the outsourcing plan. Hence, the objective of the workbook would be to develop adequate understanding amid the supply chain management team regarding the background of the decision and evaluation to be taken. The proposed workbook will thus address the economic aspects of value and utility (i.e. the concept of economics of exchange) in relation to decision making process to render a better knowledge of economic as well as financial elements related with the company’s upcoming decision. Workbook The workbook is scheduled for a 30 days period describing the aspects to be covered in 4 weekly staff meetings. The workbook will begin by addressing the aspects of economics of exchange, which is learnt to be limited amid the supply chain team in the first weekly staff meeting. In the second meeting economic aspects of BlueJay will be emphasized on to render a comprehensive understating to the staffs regarding the economic aspects of decision making with due consideration to the background of the future evaluation and decision. The third meeting will address concepts of value and utility describing its impact on the decision making process of BlueJay. Correspondingly, the last meeting will be held to obtain feedbacks and evaluate the understanding of the staffs which would assist them in contributing efficiently to the overall outsourcing process. Economics of Exchange Today, when there is a price tag hanging on every element which can be a part of a transaction, the concept of economics of exchange becomes quite apparent. It is often regarded as the process of serving commodities in exchange of a value, particularly in monetary terms. Thus, it can be affirmed that the concept of economics of exchange is based on the process of transaction which further tends to determine the balance between the customers’ requirements and the company’s capacity. It is often described as a transaction process through which the firm intends to serve its customers with the notion of earning value for the commodities offered (Williamson, 2008). In relation to BlueJay’s current economic conditions, the SLT of the firm’s supply chain management have proposed the strategy of outsourcing related to which, a number of researches are to be conducted for making effective decisions with concern to the quality as well as cost of the products. This in turn is likely to influence the economics of exchange in the supply chain process of the company where it is required to make decisions with regards to the quantity of in-house production, quantity of products to be outsourced, prices and the risks which are connected with the suggested procedure. It is expected that the outsourcing will assist the firm in reducing the cost of production for the goods and will also assist in meeting excessive demand from the customers. On the contrary, there are varied risks related with the proposed outsourcing strategies such as production disruption risks, risks in maintaining the quality standards, risks of foreign exchange rate fluctuations as well as the risks of supplier’s failure to render time efficiency and quality assurance. Another risk that might be faced by the company can be identified in relation to its financial advantages in terms of production costs. Hence, the financial department of the firm is required to continuously monitor and investigate the costs which are to be incurred for outsourcing of products prior to the instigating of the suggested model where the main purpose is to provide quality products at reasonable prices to the customers as per the quantity demand (Liu & Nagurney, 2010). The economic aspects of the firm Concerning the economic aspects related with the supply chain management of BlueJay, the management is required to investigate the financial needs which are required to develop a better manufacturing process. Contextually, the cost of manufacturing the products in-house should be compared with the cost of outsourcing to determine the strategy which will be beneficial for the firm. The firm is thus required to make adequate investments in order to increase the in-house manufacturing of the products through outsourcing, to meet the excessive demand of the customers. Furthermore, it should be taken into account that the investments which are to be made for increasing the manufacturing capacity through outsourcing should be competent to generate profit for the firm. It is in this context that the firm can intend to purchase raw materials from the suppliers and assemble those in-house which shall ensure quality and increased production capacity. However, there might be various other portions or divisions in the supply chain process which can be outsourced for better profitability which needs to be identified efficiently. The concepts of value and utility Considering BlueJay’s current position, it should render significant consideration towards the quality aspects as well as the cost of the products which shall not only enhance the economic utility of the commodities, but also augment its value. In this regard, the concept of utility is often regarded as a vague concept rather than a discrete phenomenon, which is determined by emphasizing on the gap between customers’ expectations and the company’s capability to satisfy their demand. In the similar context, value for a commodity, as per its economic conception, depends on the labor invested to produce the commodity. It is in this context that the labor rendered tends to determine the satisfaction level of the customers and therefore, influences the utility of a particular commodity (Ronkko, Fruhwirth and Biffl, 2009; Alchian, 1953; Huemer, n.d.). In this context, in order to preserve efficiency in terms of utility and value for the commodities rendered, the suppliers, with concern to the outsourcing strategies, are required to deliver cost as well as time efficiency. The quality as well as the cost of the products in the in-house manufacturing is maintained in accordance with the firm standards which can bear the risk of getting disrupted due to proportional or partial outsourcing of production elements. It is majorly owing to the fact that the portion of the products which are outsourced may not be of the similar quality as per the firm’s standards and might cost more for the firm. Hence, strategies should be derived in order to preserve the utility margin and the value of the commodities from a futuristic perspective (Chastain-Skillman, Inc, 2010). Conclusion BlueJay has launched various new products in its recent performances, owing to which the demand for the products have surpassed the expectation of the company indicating future growth prospects but at the same time revealing the company’s limitations of satisfying such huge demand through in-house manufacturing. It was in this context that the supply chain management division has been concentrating on outsourcing a portion of its supply chain functions. However, it should be mentioned that various aspects needs to be considered in this respect in relation to the concept of economics of exchange including the various economic aspects such as risks, financial requirements and utility as well as value of the commodity served. Conclusively, it needs to be mentioned that proper importance also needs to be provided towards the knowledge of the staffs engaged in the process in order to enhance the coordination as well as efficiency throughout the supply chain. References Alchian, A. A. (1953). The meaning of utility measurement. Retrieved from http://www2.uah.es/econ/MicroDoct/Alchian-Utility%20Measurement_1953.pdf Chastain-Skillman, Inc. (2010). Decision-Making, Risk and the Utility Function. Retrieved from http://www.chastainskillman.com/downloads/articles/3Q10DecisionMaking.pdf Huemer, M. (n.d.). The theory of economic value. Retrieved from http://home.sprynet.com/~owl1/economics.pdf Liu, Z., & Nagurney, A. (2010). Supply Chain Outsourcing Under Exchange Rate Risk and Competition. Articles, pp. 1-32. Ronkko, M., Fruhwirth, C. and Biffl, S. (2009). Integrating Value and Utility Concepts into a Value Decomposition Model for Value-Based Software Engineering. LNBIP 32, pp. 362–374. Williamson, J. (2008). Exchange Rate Economics. Working Paper, pp. 2-27. Read More