Running Head: OUTSOURCING SUMMARY
Outsourcing Summary
University of Phoenix
FIN 325 Financial Analysis for Managers II
Todd Kucker
September 8, 2008
Mergers and Acquisitions Paper
Outsourcing is the allocation of jobs or tasks from internal production to an external source (i.e. subcontractor). While there are cases of outsourcing of jobs going to companies within the United States, most recently, it has come to mean the elimination of U.S. employees to overseas companies. Although there has to be a motive or reason which would encourage a company to outsource tasks in lieu of hiring their own employees. The motive or reason for most would be the ‘bottom line’, it is the single thing which drives companies around the world. What ever steps need to be taken in order to increase the bottom line, one can expect the company to do everything possible to achieve higher profits.
An area that effects bottom line in a positive or negative manner would be employee wages. Sunbird could potentially outsource some of their jobs or tasks at a lower rate then what they are currently paying their employees. An example would be the manufacturing of a product or delivery of a service in the United States costs an organization $27 per hour plus benefits vs. having the opportunity of outsourcing the service and only paying $3 per hour. Wages aren’t the only reason for Sunbird to research the possibility of outsourcing, the costs of benefits are yet another reason. The cost assoicated with benefits, healthcare and retirement, per employee add up over time. When outsourcing occurs Sunbird will no longer feel the burden of those high costs. Facilities and inventory also play a key role in the a companies bottomline, between land and building/equipment the company is paying close to $2 billion a year. Inventory plays a role in these cost since the more inventory the company has on-hand the more buildings it needs to store the surplus.
With greater global...