Thesis statement
In this presentation we will see what is the advantage
in financial terms of outsourcing. We will also
see what are the non-financial implications and
what measure can be taken to remedy the situation
by saving jobs,
Analysis
Let us see what will be the financial implications
if the production of GPSN’s is outsourced.
Cost per unit (GPSN)
Produced internally $355
When outsourced 295
Saving per unit when outsourced $60
Monthly savings for 8,000 units 8000*$60
= $48,000
Add storage rental saved = 4,000
Total savings per month = $52,000
Total savings per year = $624,000
We have been told that in case of the production
of GPSN’s being outsourced the company will
have to pay a sum of $64,000 annually to the employees
union. This is about ten percent of the amount
that would be saved.
Thus it is clearly advisable to outsource the
production of GPSN’s to the Thai company
Far East Enterprises, Ltd. From the financial
point of view it makes sense to outsource.
However there is more than financial consideration
alone in this issue. The elimination of jobs will
crate a severe unemployment situation in the country.
Behemoth Motors Corp. is just one manufacturer.
If we add up all the manufacturers and if everyone
decides in favor of outsourcing what will become
of the U.S. employment situation. All the skilled
workers will be out of jobs and queue up for the
social security. Even with the social security
subsidies these laid off employees will not be
able to run their households. The economic disruption
will snowball into a major crisis.
What then is the solution? It would be advisable
under the given circumstances that the employees
are taken into confidence and told that rather
than face lay offs they can continue in their
jobs but at salaries that are revised downwards
or cutting of frills so the costs are brought
down to a satisfactory level and outsourcing is
not resorted to. Most will agree for that rather
than becomes jobless overnight and start searching
for a job in a sellers labor market.
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