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Group # G Group Members

    

Kamal Mumtaz Ahmad Bilal Kaleem Ullah Khan Waqas Ahmed Irfan Ahmed

SP10-MBSP10-MB-0082 SP10-MBSP10-MB-0013 SP10-MBSP10-MB-0081 SP10-MBSP10-MB-0249 FA09-MBFA09-MB-0056

Project Presentation
The Management Implications Of In-sourcing, Out-sourcing InOutAnd Cloud computing For Strategy Makers In Business

Synopsis
Introduction The Source Decision In Sourcing Advantages Disadvantages Out Sourcing Advantages Disadvantages

Factors Affecting In Sourcing

Factors Affecting Out Sourcing

Cost Analysis

Cost Analysis

Sourcing Strategies

Sourcing Strategies

Cloud Computing

Role of Strategy Makers

Effectivity

Objectives
 

 

 

Sourcing decision. Discuss the various advantages & disadvantages surrounding sourcing decisions and identify some of the key factors favoring one approach over the other. Perform a simple total cost analysis. Explain what a sourcing strategy is, and show how portfolio analysis can be used to identify the appropriate sourcing strategy for a particular good or service. How Cloud-Computing gives the benefits in decision Cloudmaking of in-sourcing & out-sourcing in an organization. inoutThe important Role of Strategy Makers in in-source & inoutout-source under the cloud-computing in an organization cloudcont

Focus


Sourcing decisions
High level, often strategic decisions regarding which products or services will be provided internally and which will be provided by external supplysupply-chain partners

In business organization, two types of sourcing techniques namely


 

In-sourcing InOutsourcing

Make-or-Buy Decision

Introduction


What is In sourcing?  Product and services provided in house  Delegates organizational work to the entity which is internal yet not part of organization  Also defined as transferring work from one organization to another organization within the same country  Also mean an organization building a new business centre or facility which would specialize in a particular service or product

cont

Introduction


What is Out sourcing?  Products and services provided by firms supply chain partners  Delegating organizational non-core functions to an external nonorganization specialized in providing a particular service or products

cont

Introduction


What is cloud computing?  Shared computing resources  As opposed to local servers and devices  Made up of Grid Infrastructure  Scalable  Virtualization  Web applications  Specialized raw computing services

cont

Introduction


What is best for organization?




Expertise services in areas which do not fall under core competency, then outsourcing will be good option. If work involves production, then it would be ideal to opt for in sourcing

Advantages and Disadvantages of In-sourcing InAdvantages




Disadvantages


High degree of control Ability to oversee the entire program Economies of scale and/or scope

Reduces strategic flexibility Required high investment Potential suppliers may not offer superior products and services

Advantages and Disadvantages of Outsourcing


Advantages


Disadvantages


High strategic flexibility Low investment risk Improved cash flow Access to state-of-the-art state-of-theproducts and services

Possibility of choosing a bad supplier Loss of control over the process and core technologies Communication and coordination challenges Hollowing out of the corporation

Factors That Affect the Decision to In-source or InOutsource

Factors
Environmental uncertainty Competition in the Supplier s Market Ability to monitor supplier s performance Relationship of product / service to buying firm s core competencies

Favors In-sourcing
High Low

Favors Outsourcing
Low High

High

Low

High

Low

Total Cost Analysis


Ultimately, Managers must understand the cost issues associated with in-sourcing versus outsourcing. Determining the actual cost of a product or service is a complicated task requiring both good judgment and the application of sound quantitative techniques. In this section we will first examine the direct and indirect costs managers must consider in making such decisions. Then we will run through a simple cost analysis.

In-sourcing and Outsourcing Costs InIn-sourcing Outsourcing


Price

Direct costs

Direct

material Direct labor Freight costs Variable overhead


Supervision Administrative

(from invoice) Freight costs

Purchasing

support

Receiving Quality

Indirect costs

Supplies Maintenance

control

costs Equipment depreciation Utilities Building lease Fixed overhead

As the table shows, these costs are typically divided into direct & indirect costs. Direct costs: Direct costs are those costs that are tied directly to the production of a good or service, such as materials costs, labor costs, and variable overhead. If, for example, a product requires 1.3 square feet of sheet metal, and the cost of sheet metal is $0.90 per square foot, the direct cost of the sheet metal is: $0.90 * (1.3 feet) = $1.17

Indirect costs:
Indirect costs, as the name implies are not tied directly to production levels. Building lease payments, depreciation of equipment, and staff salaries are classic examples of indirect costs, which in essence represent the price of doing business. To understand the true total cost of in-sourcing or outsourcing, Managers must assign or allocate indirect incosts to individual units of production. However, that task is not as easy as it may sound. Suppose managers are trying to decide whether to make a product in house or outsource it. They estimate they will need to spend $600,000 just to design the new product. If they plan to produce 200,000 units, they might assign the design cost as follows: $600,000 / 200,000 units = $3.00 per unit.

Sourcing Strategies


Single sourcing
The buying firm depends on a single company for all or nearly all of an item or service

Multiple sourcing
The buying firm shares its business across multiple suppliers

Cross sourcing
Using a single supplier for a certain part or service and another supplier with the same capabilities for a similar part

Dual sourcing
Using two suppliers for the same purchased product or service

Cloud Computing


Cloud computing refers to the use of Internet-based (i.e. Cloud) computer technology for a variety of services (including storage capacity, processing power, business applications or components). It has become more usefully characterized as a style of computing where massively scalable IT-enabled capabilities are provided as a service to multiple customers. Unlike previous IT licensing models, however, these services are typically billed on a consumption basis (giving rise to other common phrases such as utility computing and platform-as-a-service ).

Cloud Computing
The concept of resource pooling, virtualization, dynamic provisioning, utility and commodity computing must be leveraged to create a public and private cloud


Public cloud
Uniform IT services provided remotely to multiple customers from third party controlled data centers

Private cloud
private cloud is a proprietary network or a data center that supplies hosted services to a limited number of people.

Types of services



Infrastructure-asInfrastructure-as-a-Service (IaaS)
provides virtual server instances with unique IP addresses and blocks of storage on demand Customers use the provider's application program interface (API) to start, stop, access and configure their virtual servers and storage. In the enterprise, cloud computing allows a company to pay for only as much capacity as is needed, and bring more online as soon as required.




Platform-asPlatform-as-a-Service (PaaS)
is defined as a set of software and product development tools hosted on the provider's infrastructure. providers may use APIs, website portals or gateway software installed on the customer's computer.
cont

Types of services



Software-as-a-Service (SaaS) Software-asthe vendor supplies the hardware infrastructure, the software product and interacts with the user through a front-end portal. frontBecause the service provider hosts both the application and the data, the end user is free to use the service from anywhere.

Key Features
 

OnOn-demand self-service self

i.e. automated response by servers to direct requests by clients i.e. from anywhere, using any device i.e. the provider allocates resources according to demand, rather than assigning resources to particular clients i.e. resources are scalable according to demand i.e. resource usage is metered

Broad network access




Resource pooling


 

Rapid elasticity


Measured service


Potential Benefits From Cloud Computing




Access to Services that are otherwise Unavailable. Access to Services from Multiple Desktop devices Access to Services from Scaled-down devices. Access to Services from Multiple device-types.

Technical Benefits of Cloud Computing




Professionalized backup & recovery. Scalability. Copyright Convenience.

Financial Benefits of Cloud Computing




Lower Investment / Up-front Cost. Lower Operational Cost. Lower IT Staff Cost.

Role of Strategy Makers




Sourcing strategy is a mental chess game that leaders play before going to market. For out sourcing the strategy makers must analyze the potential suppliers, and then decide how to approach the market with the chosen suppliers. Right technology & tools i.e. cloud computing help in this effort. For In-sourcing the key for Strategy Makers is to choose the tools wisely and use them well. The Cloud Computing offers Strategy Makers a vast platform from which they can reach new markets and users, enabling them to bring their applications into the Cloud for access by users on a global scale without the traditional infrastructural investments required of going online .

Conclusion
Strategy is the conduct of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its longterm objectives. The debate between outsourcing and insourcing has raged for over a decade without a clear answer to which is better.Quite simply, sourcing decisions are critical to operations and supply chain managers, it tells them what they will and will not be responsible for .  In-sourcing gives a company a high degree of control over its operations, which is particularly desirable if the company owns proprietary designs or processes. In-sourcing also lowers the manufacturing costs. On the downside, in-sourcing can be risky because it decreases a firm's strategic flexibility. The semiconductor industry is a good example of the risks of in-sourcing.  Outsourcing typically increases a firm's flexibility and access to state-of-the-art products and processes. As markets or technologies change, many firms find changing supply chain partners easier than changing internal processes.  Of course, outsourcing has its risks. Suppliers may misstate their capabilities their process technology may be obsolete, or their performance may not meet the buyer s expectations .  Cloud computing combines the best of infrastructure utility out-sourcing with the IT control of in-sourcing and the lower-cost advantages of serverconsolidation.
Sourcing

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