Case Study Futronics
The primary objective of this case is to help the management make the right decision about whether to go for outsourcing or to stick with the same pattern. Apart from that, another thing that should be considered is the cost associated with the procurement and storage of office equipment, maintenance, repair and operations (MRO), and outsourcing, which involves purchasing a service and material (Hounsell, 2005).
When the cost reduction program came under way, the first thing which came under scrutiny was the central stores at Futronics. These central stores came into existence in the middle of the 1950s when there was a perception floating in the market that savings could be generated from bulk buying.
Then, this step proved very successful as there was a reduction in the individual office inventories and decreased purchase order expenses (Anderson, 2009).
Cost-cutting analysis:
From the given information in the case, it could be derived that a 6 percent saving on the purchase price can be achieved on 90 percent of the items purchased. If we inspect these figures, it would mean that a minimum of $7500 could be saved per year ($140,000 x 0.90 x 0.06 = $7560) if Futronics decides to seek the services of outside stores.
- Secondly, if the store operation is closed, the cost of the personnel and space can be reduced by approximately $200,000 per year. Apart from that, the freed-up space can be used for other purposes, and the four people who were working there can be adjusted to any other part of the organization.
| Saving % | Items % | $ Saved | Total Inventory | Working |
| 6 | 90 | 7500 | 140,000 | $140,000 x 0.90 x 0.06 = $7560 |
- Furthermore, the discontinuance of the store’s operation will eliminate the time required for supervising these operations.
- Another potential advantage of outsourcing would be that previously, the time required for specific letterhead stationary was around three to four weeks.
Case Study Futronics
If Futronics opts for outsourcing, the interested firms promise that their order completion time will not exceed ten working days. This can save a large number of days, and during that time, other important tasks can be completed.
Similarly, as mentioned in the case, acquiring new items was a lengthy job that required a long time. An example of Post-Its is given, which was in the store five months after its launch.
Another important issue is that Futronics currently has forty-two area sites compared to its previous twenty-one area sites. This means that as the business continues to grow, more space will be required.
Delivering the materials to the sites will also become costly and more difficult to manage. If the supply houses are not up to the industry standard, it will hurt the company’s reputation and image in the market.
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