Sher-Wood Case Essay
While outsourcing provides numerous advantages for companies such as low cost production, outsourcing has proven to have numerous disadvantages for hockey companies who have outsourced the production of their equipment abroad. These include: Global Sourcing Disadvantages Make it difficult for companies to coordinate divisions amongst groups within companies Differences in cultures will make it difficult for people to communicate Distance requires additional training Quality Inconsistency Reduce domestic employment = tarnish image More difficult to manage exchange rates and labor costs
OUTSOURCING: The company had to work closely with the Chines partner – sent their experts to China so they could be trained about the production requirements. Though they had concerns about raising Chinese labor costs and exchange rates, it was still relatively cheaper Shipping to and from China is expensive No product personalization due to large volume production Negative market perception as hockey isn’t a Chinese sport, yet products manufactured there
CHALLENGE: Boost sales by improving quality and lowering prices – to do this they are faced with the questions of whether they should move manufacturing of remaining sticks to China also? Some issues they will face are: Move additional equipment to China which is costly Send over additional experts which is also costly What would happen to the 40 affected employees? It would be more advantageous from a cost reduction perspective for the company to stay move the production of all hockey sticks to China.
They would be able control the quality of the sticks while producing it for much less. This will allow merchants to have a higher profit margin and will also allow consumers to pay much but receive a premium quality stick. If this occurs the company must be willing to accept that they will then serve a new consumer market. As a significant number of hockey players are Canadian, they will likely prefer to purchase sticks from a local producer and not support a company outsourcing in China.