Insourcing-outsourcing case – Nature of Product being considered

Outsourcing decisions also need to consider the nature of the part that the decision to outsource or not is being evaluated. When process or a component is a core competency of the organization, outsourcing such a process could eliminate the competitive advantage that the organization enjoyed, hence its performance. As noted by the strategic sourcing expert, core competencies are not what the entity is “good at” but aspects that the organization possess, that are difficult for competitors to imitate. Accordingly, such competencies help the company access new markets, build sustained growth and provide value to the customer, thus establish customer loyalty.

Accordingly, though Demwalt has been in the manufacture of piston for ages, such may not be its core competency. Demwalt core competencies seem to be in the processes it has established and the skilled personnel it has. For instance, the establishment of work cells seems to be a core competency that, according to the case study, Demwalt can replicate in other processes it engages in. The critical contribution of this process is evident from the benefits (30% in quality and 20% in productivity) the entity realized on shifting from a process layout to such cell layout. The critical part of the personnel is evident with the claim that with the support of the engineers, the supply management group can appropriately address any quality concerns that arise with outsourcing supplies of piston. According the main core competency for Demwalt is the sound process management it has established that could help it achieve transformation smoothly with the support of its qualified personnel. Go to part 4 here.

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