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Supply Chain Management in Db Toys

Essay by   •  November 28, 2018  •  Essay  •  960 Words (4 Pages)  •  34 Views

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Supply Chain Management

DB Toys

        In the current world, outsourcing is a major cost-cutting strategy that can assist an organization with huge operation costs to enhance efficiency. Outsourcing refers to the process of hiring another party or service provider to perform some services and create products that were developed in-house. This occurs when the organization is facing huge high costs of production. Outsourcing is applicable if the company does not have an expertise in a given function. Furthermore, a company may also outsource because it wants its staff to concentrate on core business.

        According to Jeffery (2006), DB Toys was facing a supply chain problems that are increasing the costs of the company’s operations. Additionally, the company was also losing its market share leading to decreased sales revenue sales. The company CEO of the company was looking for an option to help the company to reduce the increased costs. Some of its top managers singled out outsourcing as one of the best strategies for helping the company to cut down its costs of operations. They identified Inflection Consulting as a leading consulting company that offers outsourcing services. As a result, this paper focuses on analyzing the best services to outsource from the company based on the pricing strategy and the service to be offered. The two questions are comparing two outsourcing services provided by the company which are business applications and business process outsourcing.

Q5 Answer

Best pricing Strategy

        When determining the best pricing option for each of the two outsourcing type available for DB Toys, it is important to consider the available resources, the problem facing the company, its ability to reduce cost, and the profit it yields for the company at a specified time. Under do business application outsourcing, I believe that the best pricing option to adopt would be the fixed price. This is because business application outsourcing services are limited implying that many purchases may be done within the year thus increasing the cost of cost-plus and transaction-based contracts. This implies that the company will have to pay $9.3 per every quarter irrespective of the purchases made (Jeffery, 2006). This would help reduce the cost of operations of the company at the start of the project. This is the best way through which DB Toys will save thus reducing costs of production when the cost of the contract remain low.

        On the other hand, I believe that transaction based contract will be the most appropriate pricing strategy for the company under business process outsourcing. This is because the cost is charged depending on the number of purchase orders each costing $62 as reported by Jeffery (2006). Many services can be rendered in one purchase order implying that under this pricing strategy the company can limit the number of purchase orders per year. In so doing, the company will save a lot in very low-cost situations. Under business process outsourcing, the services can be delivered in one purchase order whereby so many applications are involved in helping the company to pay a low cost for many services delivered.

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