• A project you are managing has a supply-chain issue. You are not able to continue utilizing a primary vendor. Select a product that would be essential to a project and identify the pros and cons of outsourcing an element of the project. What are the pros and cons of outsourcing? What could you do to minimize the negative effects?

  An example of a product that would be essential to a project is the plastic instrument panel components in the construction of a vehicle. In this scenario, if a company created a project to produce a new model of car, each component would be critical to producing a model of that vehicle, as well as the end product. With this specific component, it may be beneficial for the project team to outsource this part for production.

  Larson and Gray (2021) provide four advantages to outsourcing project work, which includes cost reduction, faster project completion, high level of expertise, and flexibility. In this situation, significant cost reduction could be found by utilizing established plastic manufacturing plants in China, such as Summit Plastics that Ford utilizes for this part. With the cost of labor, coupled with the established equipment and present resources, this part can be produced cheaper than locally in the United States. Additionally, with the manufacturing facilities in place, production completion times are reduced and quick changes can be made to the specifications of a given part. Finally, multiple different companies can be utilized that provides benefits to the company by outsourcing across the globe. This provides the project manager the flexibility to utilize these different companies to receive all required products.

  Outsourcing project work also has several disadvantages, which includes coordination breakdowns, loss of control, conflict, security issues, and potentially being a political hot potato (Larson & Gray, 2021). With the specific example provided above, the political hot potato could result in blowback from multiple fronts. First, there is the ethical dilemma associated with having parts manufactured in China due to poor labor practices. Second, employment opportunities in the United States would disappear while utilizing a manufacturer in a different country. If performing this same action with manufacturers around the world, it can become a nightmare to coordinate all pieces associated with the project, as well as control being lost due to utilizing third party manufactures for this function. Somjai (2017) provides an additional disadvantage with outsourcing of synchronization of deliverables. Outsourcing can result in subpar quality and experience longer delivery times than if it were produced locally.

  There are several steps that a project manager can take to minimize the negative effects associated with outsourcing. One of the most important steps is the development of a Request for Proposal (RFP). Larson and Gray (2021) describe the different parts that make an RFP up includes the summary of needs and request for action, statement of work, deliverable specifications and requirements, responsibilities, project schedule, costs and payment schedule, type of contract, experience and staffing, and evaluation criteria. The RFP can detail the minimum specifications that need to be met for a given part, as well as the timeline associated with when that component is due. The project manager can then receive bid proposals based on the information outlined in the RFP. This is valuable, as the project manager and key stakeholders can effectively evaluate different companies to provide the best product through multiple different categories, thus reducing the disadvantages by selecting a single company, as explained above. Another way these disadvantages can be minimized is by using a control and tracking system that can be linked with each distributor. Lee, Yeung, and Hong (2012) explain that the use of such a system can result in reduced lead-time and cost, while providing constant updates to the project manager throughout the lifecycle of a project.

  Identify at least one element for each of the six outsourcing considerations in your answer.

  While taking outsourcing into account, there are several different considerations that must be made. First, there are legal and political considerations. Parikh and Gokhale (2006) explain that these components can result in significant impacts if the legal and political considerations are not analyzed for a given country. For example, if deterioration in relations between the two countries are present, the possibility exists for sanctions or tariffs to exist, which would negatively impact the project. It may be a good idea to select a manufacturer from a company that belongs to a certain pact or free trade agreement with the United States, such as USMCA, which serves as a substitute for NAFTA. Second, there are security and safety considerations. As previously mentioned, the working conditions of a specific company need to be evaluated. If China utilizes unsafe work practices and conditions at this local manufacturer, then they should not be selected unless accommodations can be made and verified.

  Third, geographic concerns should be considered. For example, if the manufacturer is in an isolated location and relies on raw material imports from another location, a small supply chain disruption can result in large trickle-down impacts to the manufacturer. Again, this could be compounded by current political scenarios occurring around the world. Fourth, economic considerations should be taken into account. The stability of the region, as well as the economic situation of a given country or region can provide valuable data in selection, such as the indication of a competent workforce. If the economic situation isnt the strongest in an area, simple processes, such as production of a specific part, may be fine. However, this can indicate that there is a lack of highly skilled labor in the region, which would make more complex processes difficult to complete in that area.

  Fifth, the infrastructure needs to be considered. Whether it is the transportation of raw materials to a manufacturing facility, or the final product to the customer, the infrastructure can play a major role in the costs and lead time for a given product. By choosing a company that is located in a region with a great transportation infrastructure established, a firm will most likely have to pay a higher cost but can rely on orders arriving on time due to minimized risk of disruptions. Finally, cultural considerations need to be considered. For this consideration, it is easy to see that a company that outsources processes and products to other English-speaking nations would have an easier time communicating, than if outsourcing occurred in multiple different nations with a different native language. Furthermore, Ramingwong and Sajeev (2007) discuss the use of several measures of cultural differences, such as power distance index and uncertainty avoidance, as a determination of cultural similarities between countries, which can result in better opportunities for outsourcing to occur.

   

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