In order to analyze the effectiveness of production of new product, in the situation where there are other lines of product manager has to assess a part of fixed costs which is involved in the production process, the market, competition, product segmentation, production process, marketing strategy and marketing, product design, and all costs associated with production, marketing, logistics and storage, etc are analyze to see the capacity, demand, selling price of the product in relation to other products in the same segment of the competition.
In this paper, we will advice Steve Rothel a supply manager for the Midwest division of the Krause Corporation to manufacture the pipe or purchasing the pipe from an outside source.
Discussion
It is recommended to the Steve Rothel to go for outsourcing as the cost associated with manufacturing the product is more than outsourcing. Moreover, Outsourcing is a key strategic resource to improve the overall performance of companies through partnerships with outside companies (www.ueanet.com).
In particular, an opportunity for development, because the consolidation process that take place in many areas, require more and more to the directions towards Human Resources of national and multinational groups to have consistent and coherent tools that integrate the management and provide relevant information useful for decision. Krause Corporation can implement different types of outsourcing. But for Krause Corporation, full outsourcing would be cost benefit (Don, Maryanne & Guan, 2007).
Cost Associated With Outsourcing
If Krause Corporation goes for outsourcing the pipe the following per pipe cost will be incurred:
Purchase option
10 Inch Diameter
23 per linear foot
230
28 per linear foot
280
supplier provided
20-foot sections
$362
Whereas, if Krause Corporation manufacture pipe the following cost will be incurred along with the extra human resource.