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Problem

Many firms are shifting selected service functions to outside suppliers. For example, Harley-Davidson recently outsourced its transportation department function to UPS Supply Chain Solutions. What factors would prompt such a decision, and what criteria would a customer like Harley-Davidson emphasize in choosing a supplier?

Step-by-step solution

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Step 1/3

Outsourcing:

The outsourcing can be simply defined as ‘a contract with another company or an individual for the completion of the specific defined task. It is usually observed in any of the business activity of the organization. Though the concept of outsourcing exists from long, the recent market trends has raised its importance because of its cost effectiveness and quality of the work. An organization can outsource the work either as a whole or partial depending on the business requirements.

Step 2/3

The Factors that would prompt a decision for outsourcing are as follows:

• The world class technology can be accessed or utilized through outsourcing that gives dynamic results for the organization

• Outsourcing to the external agencies gives organization a risk free and effective work accomplishment

• The organization outsource to a company or an individual, where there is a competitive pricing in terms of operational and labor cost

• To focus on their core business processes

• It saves the cost on re-engineering by outsourcing to a concern with the required technology

Step 3/3

The criteria that a customer like HD emphasizes in choosing a supplier is as follows:

• The level of customer satisfaction desired to attain through service

• The reliability and the quality of the products since, they reflects the good will of HD in the market

• The cost-competitiveness compared to the market trends

• The evaluation of the credit period offered (if applicable)

• The capability to meet the unpredictable demand of the product

• The geographic constraints in view of the expenses to be spent on logistics