Production outsourcing - the transfer of a third-party organization entirely to the production function or part of the tasks associated with production.
We can conditionally divide outsourcing into two types: 1) outsourcing of blanks and components, and 2) outsourcing functions and operations to ensure production. In the first case, this is the proportion and degree of readiness of the purchased units and components. In the second case, it is a matter of outsourcing the functions of transportation, repair of equipment, preparation of production, the production process itself.
-Land: premium products - made in China
Founded in 1980, E-Land is the leader in fashion retail in South Korea. E-Land successfully sold brands in the casual style of the average price category in Korea. From the very beginning, the company used outsourcing in production and sold clothes on a franchise. Corporate priority was strategic planning, merchandising and design.
In 2004, it was decided to penetrate the Chinese market. Unlike the strategy used in Korea, China chose to position itself in the form of a premium brand. To reduce costs, it was decided to transfer the product
The management of outsourcing to Chinese firms. There were doubts: the quality of products and delivery in China was not credible, especially given that it was a premium product.
However, the management of E-Land decided to invest in tracking customer feedback, strict production control and evaluation of each batch of products. All contracts with Chinese enterprises regulated the exact delivery time and the penalty system for delay.
Using outsourcing, without much investment in human resources and the creation of production lines, E-Land has concentrated on the design and adaptation of models to the Chinese market. By 2007, E-Land had 15 brands of clothing, produced 7500 models per year. The network operates in 100 different cities (500 stores). In 2007, the sales volume amounted to more than $ 300 million, which is twice the amount for the previous year.
outsourcing as an effective means of penetrating a new market
Swatch has set itself the task of restoring the market share that it lost as a result of the aggressive growth of Japanese watch manufacturers (for example, Seiko ). The key priorities for Swatch was the design in a new style, the strength of the brand and the efficiency of production. At the moment, Swatch has regained the title of the leading watch manufacturer in the world. Outsourcing (the location of production in China) played a significant role in this.
In Switzerland, production control was carried out on a vertically integrated system, in China, the company applied the same strategy. Swatch has entrusted operations on import and payment of taxes, as well as labor management to highly specialized Chinese firms. Using the knowledge and competence of Chinese experts, Swatch increased productivity, reduced costs and developed an excellent system for managing market risks. Having concluded contracts with the largest distributors, Swatch used existing supply chains. All this helped the company strengthen its brand position in the Chinese market and reach the second-largest sales volume in China in a short period of time.
Swatch is a Swiss watch brand, part of the The holding company Swatch Group Ltd. The company was founded by Nicholas George Hayek in 1983. A year earlier, an entrepreneur bought 51% of the shares of Switzerland's two largest watch companies - ASUAG and SSIH from a number of Swiss creditor banks - Omega , Tissot, Rado, Longines , etc.).
It is believed that the Swatch trademark was created as a counter to the rapidly developing Japanese watch manufacturers who conquered the market with their inexpensive wrist quartz watch. The company's goal was to return the popularity of simple watches, for which modern synthetic materials were used, as well as the latest assembly technologies. In addition, the design was redesigned. As a result, in 1983, the first hours, combining high quality and a very reasonable price, went on sale.
It is believed that the name of the brand Swatch comes from the phrase "Swiss Watch " (Swiss watches), but Nicholas George Hayek claimed, that in fact the name went from the phrase "Second Watch " (second clock), i.e. watches for every day, as an affordable accessory.
The largest stake in the company's voting shares (41%) belongs to the Hayek family.
Brands Swatch Group : Breguet, Blancpain, Glashiitte Original , Jaquet Droz , Leon Hatot , Omega, Tiffany & amp; Co., Longines, Rado, Union Glashiitte , Tissot, Swatch & amp; jewelry, Balmain, Certina, Mido, Hamilton, Swatch, Flik Flak , Endura and Tourbillon.
: outsourcing as an aid in adapting to the realities of the market
Ault developed as a vertically integrated company, which itself produced, distributed and sold its products - AC/DC converters. With the growth of production costs in the US market, the company began to lose its competitiveness.
In 1987, Ault built a factory in South Korea. The corporate priorities of Ault are strategic management, marketing and product development. In addition, the company sought to create a flexible and efficient organizational structure.
Korea's affairs Ault have gone successfully and already in 1990 manufacturing operations were started in China, in the city of Beijing. In the capital of China, a corporation was established that was engaged in sales management and marketing, as well as product development in the market. At the early stage of the Ault operations, China focused on the assembly process to reduce production costs, and only some important details were produced on site.
Most of the raw materials were supplied in the form CKD from Ault Korea. The import of raw materials using the CKD technology led to serious problems in Ault China . Autel produced a variety of product lines, which consisted of more than 5000 components. In fact, there were problems with delays in the supply of raw materials between units in Korea and China. As a result, it was decided to purchase parts from a factory near Shanghai, which avoided delays in deliveries and reduced the equipment cost by 10%.
Ault China has always paid special attention to the production of important details, and this process had to be strictly controlled. To save time, the production of these elements was outsourced, which allowed us to focus only on assembling the final product.
6. What are the risks for the company using production outsourcing? What tools are used to prevent these risks?
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