Outsourcing and Manufacturing Operations of Apple Term Paper

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[. . .] 5.

Reactions of the public to outsourcing

The actions of the company were once questioned by President Barrack Obama as well regarding the outsourcing. In response the executives said that they don't feel that "Made in U.S.A" is an option for the Apple product any more as, the excellence level of the labor abroad is a lot more along with the wages being much cheaper.

One of the most common reactions that the people have to outsourcing is the quality issues.

As it was said by Meeker and Mortensen:

There is a constant need to monitor the quality of products being made. In China the huge availability of labor makes it so cheap. However, many of workers are unskilled and therefore, it is very important to keep a check on the product quality but in the long run this can prove to be a very tiring process. And in our experience usually the defected products are anywhere from 1-8% of the total product cost.

6.

Disadvantages of outsourcing

Given below are the dangers mentioned by Meeker and Mortensen:

Danger of Outsourcing

DANGER #1: A lot of emphasis on the cheap labor without assessing the tangible and intangible costs in a proper manner.

The reasons why these costs are often missed are:

1. There isn't proper allocation of these costs in the product cost and they are mostly paid by the firm from different budgets.

2. It is difficult to quantify them: Expedited shipments, problem resolution, and suppler development.

3. They aren't visible: Labor turnover, local taxation, ethical standards, hidden compensation, and compliance with human rights.

4. They are either underestimated or overlooked such as; the high costs of utility, cost of training, learning and control of the quality.

DANGER #2: Seeing outsourcing as only a means to reduce the costs and underestimating the values that will be gained with the help of product design. It can become very difficult to reduce the cost of the entire product if every single components cost is being focused at. This sort of focusing needs the visibility of some structured discipline such as DFMA as

1. There might not be much importance of the labor cost component.

2. The labor cost savings might get eliminated by the customs and logistics.

DANGER #3: Ignoring the fact that some of the machines aren't right for the offshore production even if they are redesigned, such as:

1. A lot of cost saving might not be seen by the products that are produced with the help of highly automated machines, i.e. when they are used abroad.

2. Shipping by sea or air can become expensive because of the size and weight of product.

3. The chances of quality failure are a lot more in the products which undergo more revisions.

Following are a few of the costs that too are associated with outsourcing and can be thought of as outsourcing's disadvantage according to Meeker and Mortensen

Ocean Shipping Cost

Other than the production cost one of the biggest expenses is the shipping to and from Asia. Some of the others costs associated with shipping are: duty, warehouse costs, cost of inventory during transit, travelling and distribution costs to the customers located in U.S. etc.

Air Shipping Cost

Products that are shipped by air cost more but the shipping time is less. However, the large packages can be very expensive to ship by air due to their size.

Material Costs

Generally the material costs aren't very different in various countries however, some materials have to be exported as they are not available in the offshore countries such as U.S. grades plastic and this can increase the cost of material being used.

References

Duhigg, C., Bradsher, K., (2012, January 21). How the U.S. Lost Out on iPhone Work. The New York Times. Retrieved from http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all&_r=1&

Corbett, M. (2004). The Outsourcing Revolution. Retrieved September 12, 2014 from http://www.economist.com/media/globalexecutive/outsourcing_revolution_e_02.pdf

Outsourcing to China A Case Study Revisited Seven Years Later. (n.d.). Retrieved September 12, 2014 from http://www.dfma.com/truecost/revisited.pdf [END OF PREVIEW]

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