Chassis Case

Marissa Botelho

Trail Frames Chassis

When it comes to deciding whether to insource or outsource a product, component of a product, or a service, it’s important to keep in mind different factors that contribute to the efficiency and success of the supply chain. Generally, outsourcing is used when a company is looking to be more cost effective. In this situation, outsourcing the design of the product to Computer Image is in the best interest in terms of cost. It costs $225 per chassis with them versus $490 per chassis if TFC were to make it. That is a savings of $265 per chassis, or in other words, Computer-Image can essentially make two units for the price of one made by TFC.

Looking at demand, Computer-Image can undertake a higher amount than TFC can. If the company does not outsource and comes to find that they are receiving orders for demand that they cannot fill, it will result in lost sales and potentially lost customers.

In regards to the setup costs, evidently it would cost less to insource the setup costs being that TFC will cost $200,000 and Computer-Image will cost $300,000. This $100,000 difference, however can be made up with the sale of 378 units since the company would be saving 50% on cost per unit by outsourcing. If TFC wants to see better results in their bottom line, spending the additional $100,000 up front would be beneficial. If Computer-Image does this setup, it will include computer systems, training, and will establish computer linkages. This will set up the company for the long-term; they will have the computer systems needed to run an efficient and productive business as well as trained employees and links between computer systems across various departments. The most vital component here is the training because without it, the computer systems are useless. The employees needs to have an idea of not only how to navigate the computer system, but also how to utilize it to perform their expected tasks to help the company improve and...