The Muenster Pump Company - Essay Example

Ned Dorf is not enthusiastic about outsourcing the parts. He is of the view that his company produces quality products and has a reputation in the marketplace. He is a bit conservative and wants to have every part produced in-house for this reason. The bigger issue is when foundry is closed down and pump housings are outsourced, what would happen to the workers working in the foundry unit? 3. SOLUTIONS: a). Best Solution: Currently, industries try to save every cent in material and direct labor costs because that is a key to survive in the long run – in the good and bad market.

Market dynamics change rapidly and efficiency is the mantra for any industry to progress in the marketplace. It is quite likely that someone else might offer pumps at lower cost by employing Union Foundry’s housing and outplay The Muenster Pump Company from its age-old secured business. The cliché ‘Survival of the Fittest’ is equally true in the business too. In the above perspective and under given circumstances, it is important to outsource L-1012 housing from the Union Foundry.

This is critical for the better health of the company in the long run. Advantages: The following advantages are envisaged.a. The Company will reduce its direct cost by more than 10% percent and will save substantially increasing the bottom line. The company can offer more competitive prices to its customers and increase its market share. b. The company will require less indirect staff for managing the in-housing foundry activities. This will save a substantial sum to the company. c. By closing the foundry, the company will have substantial spare land available and that can be used toward expansion of the existing or any new business.

Disadvantages:The only disadvantage with outsourcing is to ensure the quality supply of the component outsourced and if Union Foundry fails to deliver the supply in the future for the reasons beyond their control what should be done? b). Alternate Solution: The alternate solution is to outsource a 50% supply from outside and balance from the captive foundry. Advantages:The advantage is that the company would be able to judge the quality of Union Foundry in due course of time and then gradually increase the procurement to make it a hundred percent.

This will give the company enough time and leverage to adjust the workers in the other processes or in the expansion of the main activities. This will take care of the human adjustment without any undue pressures on company management.Disadvantages:By going ahead in the outsourcing process partly, the company would not get the full benefits of outsourcing.IMPLEMENTATION OF BEST SOLUTION:Given the Ned Dorf’s concern on quality aspects, it would be advisable to implement the outsourcing process in stages – starting with 50% of the outsourcing so that transition is smooth without any turbulence in the company.

Once Ned is fully satisfied with the quality and supply aspect, the complete outsourcing can be implemented.