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Lecture 36 : Make or Buy Decision — Transcript

by NPTEL IIT Kharagpur · 6,800 words · 1,018 segments · language en · Watch on YouTube

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0:01[Music]
0:22[Music]
0:25hello dear friends so welcome back to
0:27nptl online course on Logistics and
0:29supply chain mark management so today
0:31we'll start uh discussion on whether we
0:34should go for making the products
0:36inhouse or we should Outsource it right
0:39so the as the uh title suggest make or
0:43buy a decision right so uh under this
0:46session we'll uh talk about the
0:49Strategic Alliance what are different
0:51options we can go for and then what what
0:54will be there if we are talking about
0:56the vertical strategic Alliance where we
0:58are talking about maybe uh uh
1:01collaborating with the partners who are
1:03working at different stages of the value
1:05chain or the supply chain right or maybe
1:07the horizontal Supply uh uh partnership
1:10where we are acquiring maybe uh the same
1:13players or the competitors in the
1:15industry right and then we'll talk about
1:17why we need to go for the Strategic
1:19Alliance what are the positive negatives
1:21of that we'll talk about then the
1:23Outsourcing right and then we'll discuss
1:26some of the case studies on that so
1:28before going into the this discussion
1:30because now maybe two or three session
1:33we'll spend on this I'll just try to
1:35draw the trend line how we'll go uh with
1:38this right so first is we'll talk about
1:41the Strategic Alliance right how we are
1:44collaborating with the different players
1:47in the market right first this is basic
1:50concept where we are you know
1:52collaborating with the uh with the
1:55different stakeholders and then they
1:58will be you know uh for exploring
2:00different markets for maybe uh
2:03exploiting the technology maybe one is
2:05having that technology we how we can get
2:07the access to that how we can get the
2:10access to the different fin uh different
2:12types of resources Financial Resources
2:14technological resources Manpower skills
2:17all those things how we can get the
2:19access to those Resources by strategic
2:23Alliance then we'll talk about this make
2:26or buy decision and here we are deciding
2:29whether we should go for in-house
2:32production or we should Outsource this
2:36this should be the next step right this
2:38is how we'll go for right and then
2:40probably the next session once it is
2:43done we'll try to find out how we can go
2:47for strategic
2:49sourcing that means once we have decided
2:52that we'll go for I'm assuming here that
2:55we we have decided that for this
2:57particular operation for maybe
3:00uh preparing the sub assembly for maybe
3:03warehousing for maybe Transportation I
3:06have decided because this is not my core
3:08competency let us Outsource so once this
3:11decision of Outsourcing is done here in
3:14the second stage right so then in the
3:17third stage we'll Define what are the
3:19different elements in strategic sourcing
3:21how we can go for that so strategic
3:25sourcing that means now you need to pick
3:28the supply you need to pick the vendors
3:32right so that means vendor suppliers you
3:36will uh find out uh how many vendors are
3:39there suppliers are there operating in
3:41that industry and then obviously after
3:44that you will be going for because you
3:46will not pick all the vendors you will
3:48go will going for selection based on
3:51certain evaluation criteria right once
3:55it is done then you will talk about
3:57supplier relationship management next
3:59step should be supplier relationship
4:02management how we'll manage the
4:04suppliers and once you have set up the
4:07supplier uh stakeholders throughout your
4:09value chain your supply chain the next
4:12thing is continuously monitoring them
4:16and then purchasing Outsourcing is done
4:18then now you'll purchase in repetitive
4:21orders you'll raise poos against
4:24purchase orders against all those
4:26vendors right so that means how you will
4:28do that purchase orders will be raised
4:30based on the vendor rating of the
4:33individual vendor so this is the seventh
4:36step we'll go for so maybe two or three
4:39session will cover all these seven
4:42perspectives right once vendor is
4:44selected maybe you are selected you have
4:47selected four or five different vendors
4:49so who is going to supply maybe uh based
4:52on quality delivery price all those
4:55things we'll evaluate and then we'll say
4:57this is the top vendor should
5:00uh will allocate the maximum order to
5:02this vendor because we are getting the
5:04Strategic Advantage with that vendor
5:06right so this is the complete scenario
5:09right so going through this strategic
5:12Alliance this is obviously the legal
5:15agreement between two or more companies
5:18right where after deciding that in which
5:21area they are going to collaborate right
5:24and then they will after deciding that
5:26legal entity they will form maybe the
5:28third entity where they were not
5:30operating earlier if we will take the
5:33although there are different uh
5:35scenarios how they are collaborating but
5:37let's take about the example of maybe
5:39Hero Honda so hero was doing the cycling
5:42business right non fuel vehicle two
5:44wheeler and then uh Honda was uh into
5:48that uh some foreign industry where they
5:50were producing bikes and they were
5:52selling the bikes right now in India
5:54they are exploring the hero supply chain
5:58and how they can neutralize that
5:59existing supply chain structure and hero
6:02will utilize the technology of the Honda
6:05So This Is How They come up together and
6:07then they went for the third Venture
6:10third entity where they were not
6:12operating earlier so this new reason may
6:14be as per your new technology as per new
6:17product offering New Market then also it
6:19is new entity right so when you are
6:23going for strategic Alliance obviously I
6:25told you first is you are getting access
6:28to New Market now now hero was only
6:31producing Cycles so now they were not
6:33going into fuel two wheer market so
6:36after collaborating with Honda Hero
6:39Honda now they are going for two wheeler
6:41Market which is operated on fuel right
6:44so then you have shared intellectual
6:46property hero got the access to Honda
6:49technology Honda got the access to Hero
6:52supply chain infrastructure in that way
6:54technology or whatever resources you are
6:56having so mutual beneficial partnership
6:59both way means both are having the
7:02win-win situation where hero is also
7:05expanding The Horizon in the Indian
7:07market and Honda got the license to
7:10penetrate in Indian market depending
7:12upon strategic Alliance we have three
7:14options Equity strategic Alliance non
7:17Equity strategic Alliance and joint
7:19venture so depending upon some factors
7:22what is the project complexity risk how
7:25you want to mitigate risk right do you
7:28want to share the risk through
7:29throughout the supply chain stakeholders
7:31or you want to keep the risk with you or
7:34do you want to have the complete control
7:36over the supply chain or the value chain
7:38or you want that maybe independently
7:41your stakeholders are operating and in
7:44that way you don't have the full control
7:46over the delivery over the price over
7:49the quality over the product offerings
7:51whenever you are going for new kind of
7:53offering or new strategy you have to
7:56collaborate you have to communicate you
7:58have to develop that trust relationship
8:01with the vendors that yes now we are
8:03going for a new product and this is how
8:06we are seeking your role right so
8:08quickly we'll go through these although
8:10this is not related with the directly
8:13supply chain but yes some financial
8:15terms but have implication on the supply
8:18chain non- strategic Alliance that means
8:21minimum resource commitment right they
8:24will work together for maybe one
8:26temporary kind of project and they in
8:30that way they are not diluting their
8:31ownership company a is having their
8:34ownership B is having their ownership
8:36but they got some temporary project and
8:38now they are collaborating on that so
8:39there is no exchange of the ownership
8:42right but because of the requirement of
8:44the projects maybe two different
8:47software development companies they are
8:49having some expertise and for that
8:51project you need expertise of both the
8:53companies so in that way for that
8:55particular project they are uh
8:57collaborating but they are not uh you
9:00know diluting their ownership this is
9:02the second uh stage where you know
9:05little higher level of commitment of
9:07resources are required and uh the
9:10ownership also diluted one company is
9:13acquiring the other company they are
9:16investing they are acquiring the
9:17ownership Equity right so resource and
9:20in uh investment will be there in terms
9:22of personal technology company might
9:25contribute significant financial
9:27resources as well because now you are
9:29getting the ownership let's take the
9:31example if car manufacturer there there
9:35is maybe battery Manufacturing Company
9:37because now we are talking about
9:38electrical Vehicles so that maybe car
9:41manufacturing wants to expand the
9:43capacity because now there is Trend that
9:45people will go for maybe more electrical
9:48Vehicles because of their fuel
9:50performance sustainability measures all
9:52those things right so then they need to
9:54develop strong vendors so how they can
9:56do that they they can you know you equip
9:59their those local vendors who are
10:02producing at very low quantity with low
10:04maybe quality so then uh maybe one
10:08vendor is producing with the nickel
10:10batteries other is lithium ion batteries
10:12or maybe lead acid batteries different
10:14kind of but what is your requirement how
10:17you want to come up with that so that
10:19you know you can ensure that efficiency
10:22of the battery and longivity as well
10:25right so if you are investing into your
10:27vendor maybe in technology or some other
10:29resources that is equity investment
10:32right joint venture the highest level of
10:34resource commitment you can take the
10:36example of maruti Suzuki right or any
10:40other uh company like two pharmaceutical
10:42companies they are coming up together
10:44for maybe R&D manufacturing distribution
10:48for a new kind of drug right so that is
10:51a kind of joint venture so dedicated
10:53resources where you know uh this
10:56ownership will be both there they will
10:59be owner depending upon how much they
11:01are investing into that right so they
11:03will be maintaining the ownership of
11:05that so these were some of the uh
11:08technical terms how we can go for
11:10strategic Alliance now vertical or
11:13horizontal strategic Alliance this is
11:15important when we are talking about the
11:17value chain or supply chain context
11:19upstream or Downstream when you are
11:22acquiring when I will start acquiring my
11:25suppliers that is
11:27vertical uh strategic Alliance or maybe
11:30I will strategic Alliance sourcing uh
11:33means uh when you are you know sourcing
11:37some of the value act adding activities
11:40to your state holders right uh at
11:43different levels of the supply chain
11:45different level of the supply chain
11:46maybe raw material production you are
11:48Outsourcing to someone else maybe
11:50manufacturing you are doing of your own
11:53maybe some sub assemblies you need you
11:55are Outsourcing to some third vendor
11:57then maybe warehousing you are uh
12:00Outsourcing to some other vendor
12:02Transportation third party Logistics you
12:05are using so that means a different
12:07stages different functions are performed
12:09this is vertical integration horizontal
12:12integration is when you are acquiring uh
12:15the same players maybe one
12:17pharmaceutical industry is acquiring
12:19other pharmaceutical industry not the
12:22raw material supplier not the
12:24distribution network not the
12:26transportation agency right so that is
12:28horizontal
12:30strategic Alliance right so you can just
12:33go through this is uh how the form that
12:36operate in same stage of the value chain
12:39One Transportation agency is acquiring
12:41another Transportation agency is a kind
12:43of horizontal strategic Alliance right
12:47so you can you know collaborate in such
12:50area like marketing distribution or
12:52joint production so if maybe you are
12:54Distributing you are having your own
12:56distribution Network like let us take
12:58the example of Amazon or flip cart they
13:00are having their own distribution
13:01network but whether they are covering
13:03all the PIN codes in in the country no
13:06it's not feasible because maybe far away
13:09locations or rural locations we are very
13:12minimum orders or maybe people are not
13:14placing orders there because there is no
13:15access because your delivery network is
13:18not providing most of the products you
13:20are not selling to those locations right
13:24as long as you you calculate depending
13:26upon your how many orders are coming
13:28what is is the nature of the product you
13:30are buying quality variety level
13:32different expectation from the customer
13:34from that reason because in crowded
13:38reasons you can easily you know manage
13:40the customer requirements but what about
13:44the reason which are far away so now you
13:47want to promise that we are delivering
13:49to all the PIN codes how you can do that
13:51maybe you can collaborate with the
13:53Indian Postal Services who are having
13:56access to all the rural locations as
13:58well maybe the delivery time will be
14:00little higher 10 days 15 days or maybe
14:03more than that right but yes you are
14:05still promising that your product is
14:08reaching to the last location last pin
14:10code right so that is another way how
14:13you can uh this is horizontal strategic
14:16Alliance you can go for now strategic
14:19Alliance Domestic or International
14:22obviously when we are talking about
14:24domestic strategic Alliance we are
14:26saying that maybe we uh we want to you
14:29know uh explore in that particular area
14:33which we have not explored earlier right
14:35maybe you are a local brand you are very
14:38famous in uh Western reason or maybe
14:41Northern reason or Eastern reason you
14:43want to expand your market so then is
14:46you you need to go for the domestic
14:48strategic alliance with those Partners
14:50maybe you are looking for distribution
14:52you are operating in northern part and
14:54you want to distribute your product in
14:56the South part okay so how you can do
14:58that you need need to go for uh kind of
15:01vertical uh strategic alliance with that
15:04some Transportation or distribution
15:06Network agency who is already operating
15:08in the South Region pooling resources
15:11because we are very small organization
15:13regionally we are working so if we can
15:15collaborate with maybe two or three
15:18different you know uh uh players uh in
15:22the same industry we can pull the
15:24resources right and in that way we will
15:26be more efficient how we will be more
15:28efficient because now earlier we were
15:30only one organization we were producing
15:32only 10,000 items but if I'll
15:34collaborate with another organization
15:36which is producing or maybe having order
15:39quantity of maybe around 1,500,000 units
15:43per day so that means instead of
15:45producing 10,000 now collaborat we can
15:47go for producing 25,000 item that means
15:50economies of scale will also be targeted
15:53right gain access to complimentary
15:56resources because different players
15:58having different expertise so if I'm
16:01expert in manufacturing maybe my other
16:03collaboration partner he's very very
16:05expert in R&D right so that means we
16:08should go for collaboration like apple
16:10what apple is doing Apple is very good
16:12with R&D designing the features and
16:15software development part apple is not
16:18at all producing any any product which
16:21they are selling so for production they
16:24know China is the best strategic
16:27location as for you know maintaining the
16:29low cost right so they are Outsourcing
16:32manufacturing to majorly China now they
16:34are looking another strategic partner
16:36India as another big partner for uh you
16:39know manufact setting up their
16:41manufacturing facilities International
16:43strategic Alliance obviously earlier we
16:45were having Market access to only local
16:48market we were talking about why don't
16:50we go for overseas market so then in
16:53both way either we'll get more supplies
16:55cheap supplies quality supplies and
16:58we'll get
16:59the access to the market as well so your
17:02forward supply chain also there is Scope
17:05when you're going internationally
17:07reverse supply chain also there is scope
17:09because we can have access to better raw
17:11material right avoiding import barriers
17:15so very simple example you might have
17:17seen usually uh like in Delhi when they
17:21are selling some products like let's
17:24talk about the electrical products right
17:26so electrical panels or electrical
17:28equipments whatever they are selling so
17:31because Delhi is uh uh size wise
17:34geographical size wise very small right
17:38so but they are having ma majorly their
17:41Distribution Center let us say if some
17:43demand is coming from NOA or gulo so
17:46that means the outer Skutt means outside
17:48of Delhi okay so that is another state
17:51so how what they are doing maybe they
17:53are fulfilling the loc uh their order
17:56customer order from Delhi only but
17:58billing will be done from that State
18:01office either up state or harana state
18:04because then they will be avoiding you
18:06know some tariffs and import duties kind
18:09of things will be there when you are
18:10talking about overseas as well so if you
18:13are you know apple is producing in China
18:17importing in India then selling products
18:19in because now in India also the product
18:22uh Apple product demand is increasing
18:24right the purchasing power is increasing
18:26so why instead of you know producing in
18:29China and then paying all that uh import
18:32duties and then selling here in India
18:34may be costly they are looking for
18:36because that huge customer potential is
18:38there why don't we produce here only and
18:40then we'll sell here only International
18:42Synergy is also that way you can
18:44maintain because now internationally you
18:46have gone so if my brand is if I'm
18:49bearing something or using some product
18:52which is internationally known obviously
18:54you feel comfort you feel more reliable
18:56with the product quality there safety
18:59features and all those things right and
19:02then you can develop your core
19:04competencies because now I restricted to
19:07what I have been you know doing since
19:10long right so this is my R&D is my uh
19:14core competency I need to develop this
19:17further but let us Outsource
19:19manufacturing to like apple
19:21manufacturing to India and sell in India
19:23only right so the purpose of Outsourcing
19:26and strategic Alliance so till now we we
19:28can understand when we are going for
19:30outsourcing so very basic purpose is
19:33enhance your competitiveness so now
19:36apple is enhancing the competitiveness
19:39not only Apple if you talk about your
19:41sports industry Sho so Nike is another
19:44player who is not manufacturing right
19:46they are also Outsourcing Philips I
19:48always thought about that in India they
19:50are not manufacturing any product of
19:52their own what they are doing they are
19:54very good with the R&D they are very
19:55good with the marketing they are doing
19:57that part and they manufacturing is been
20:00completely done by some third party
20:02their co-manufacturers are there and
20:05Philips have appointed their quality
20:07Engineers production Engineers all the
20:09mil this material uh planning engineers
20:13in their uh uh co-manufacturer sites and
20:16they are regularly they are ensuring
20:18that that quality standard quantity
20:21variety that can be insured so in that
20:24way enhanced competitiveness because you
20:26are not good with manufacturing your
20:28manufacturing is outsourced to that
20:30partner who is very very competitive in
20:33that so that is first point why you are
20:35going for that improve competency uh
20:38sorry efficiency and cost Effectiveness
20:42now the one thing is maybe you are small
20:46player so that much order you are not
20:48producing so if I'm out so per unit cost
20:51of producing that order will be higher
20:54so if I'll Outsource this to third
20:56vendor who is producing maybe for two
20:58three different players so in that way
21:00the economies of scale that that person
21:02can achieve and then the per unit cost I
21:06I can reduce that right so in that way
21:09cost Effectiveness will be there because
21:11the example if we can quote about the
21:14restaurant so what restaurant is doing
21:18cooking food and known for their recipe
21:22and I like whatever they are cooking
21:23right so but because I don't have always
21:26time to go there this very basic example
21:29we discussed so let's collaborate with
21:32swii let's collaborate with Jato let's
21:35collaborate with other Uber Eats and
21:38then deliver the product or deliver the
21:40food to the uh customers from wherever
21:43your demand is coming right so I'm not
21:46going for transportation here for
21:48transportation I'm so if today I'm
21:51getting 50 orders I'll process that 50
21:53orders and I'll pay swii zato their
21:56margin for 50 orders tomorrow I am
21:58getting $500 I'll pay for that so cost
22:01efficiency and your uh uh that uh total
22:05productivity can be improved access to
22:08New Market and customer so new markets
22:12obviously if you're going overseas or if
22:15you are expanding your Market from
22:17northern part to southern part or
22:19western part or Eastern part so
22:21obviously even then you are getting
22:23access to the market instead of
22:24producing for those many that those many
22:27products for that not part only now you
22:30can expand that but expanding that maybe
22:33if your manufacturing capacity is not
22:35that high and you are not sure about the
22:37demand if you are expending in other
22:40reasons even then you are not sure so
22:42the first decision may be let us
22:45collaborate with some partner who will
22:47be manufacturing on our behalf and we'll
22:49just Market there we'll just distribute
22:51there right so then you will have access
22:53to New Market Foster Innovation and
22:55learning when you have two or three
22:58different organization you can share
23:00your knowledge your Innovation skills
23:02and then in that way you you can develop
23:05that environment of you know continuous
23:08uh like Philip uh Phillips is promoting
23:11right Innovation and you so that
23:13continuous environment of innovation can
23:16be ensured right mitigating risk and
23:20uncertainty so when you are you know uh
23:24collaborating with the Strategic
23:25Partners like I talked about your
23:28restaurant you are cooking food but you
23:31have outsourced to zato so risk in that
23:33way is also lowered if you are not
23:35getting enough orders today so let's
23:38take example of this uh kakur campus
23:40only so when there is means uh classes
23:44are going on so almost 20,000 or more
23:47than those people are residing inside
23:50the campus right but now because
23:52vacation time is going on I don't think
23:54more than 2,000 people are there right
23:56so you just imagine the situation of the
23:58restaurants working here and then when
24:01they are dealing the demand from 20
24:0322,000 students so it is better to also
24:06to some delivery partner who can share
24:09risk this is risk right now we are not
24:11producing much we are not delivering
24:13much so this Unity you can uh share
24:17enhance flexibility and
24:19adaptability so again when you you are
24:24uh sharing Resources with the different
24:26stakeholders so in that way your supply
24:28chain will be more aile more responsive
24:31right now only 2,000 people are here so
24:35you will be responsive for 2,000 people
24:37those many orders you will produce and
24:39you will sell right but that fixed asset
24:42cost is not there that 500 bikers are
24:45they are delivering your uh orders so
24:48that cost you are not carrying that
24:50maybe the those people are carrying or
24:53your delivery partner is carrying that
24:55cost right so quickly we'll go through
24:58the benefits of adopting Outsourcing
25:00strategy right first is cost saving
25:03always whenever we are talking about
25:05Outsourcing we are talking about how we
25:07can save the cost so very simple example
25:10the title of the this session was
25:13whether we should go for uh making
25:16in-house or we should Outsource it I'll
25:18make you understand with one this is the
25:21very simple reason why Always we are
25:23trying to go for the uh you know
25:26Outsourcing this is quantity on the
25:28x-axis and let's say sales revenue on
25:33the or profit on the byy AIS so we have
25:36seen there is some fixed asset
25:39investment whenever you are operating in
25:41the market there is fixed assessment and
25:43when we are starting producing that
25:45product there is variable cost as well
25:47so let's say this is total cost like
25:50includes the fixed cost plus variable
25:52cost right now when we are producing
25:55let's say five units so this is the cost
25:58when we are producing let's say 15 units
26:01this is the cost right so that means or
26:04maybe sales and revenue will also
26:06increase but the overall profit will be
26:09starting from here only that
26:12means when we are selling five units
26:15because we have this much fixed
26:17investment cost and then variable cost
26:19because we need raw material for five uh
26:24products let's say five car we are
26:26manufacturing right now we need need how
26:28many 25 tires so that cost 25 tires 25
26:32engines 25 means in that way you can
26:35calculate all the components you can
26:36multiply by five right because we need
26:39five uh products but the fixed cost is
26:43whatever production facility you have
26:45set whatever fixed assment equipment the
26:49assembly lines you have set right so
26:51that is your fixed cost now you can see
26:54this we can say is a reason which is no
26:58profit means loss reason as long as you
27:02are producing quantity less than this
27:04let's say star that means you will be in
27:07loss so this is loss reason but if you
27:10have quantity more than that this is the
27:13profit when you will recover your all
27:15cost your profit will be more than your
27:18fixed cost plus variable cost so this is
27:21the very basic concept when you should
27:23Outsource obviously when you are having
27:26you are having order less than this
27:27quantity
27:28here you should
27:31Outsource but you are having quantity
27:33more than that then you should produce
27:36inh house because that many you orders
27:38you are processing inh house so there is
27:41margin after that you can make the
27:43profit but it's not only the single
27:46Criterion you can go for then even if
27:49you are producing more than that let's
27:51say I'm not very good with the packaging
27:53and I don't want to go into that even
27:55then I will Outsource I'm not good with
27:57the transport I know if I'll do the
27:59transportation part I will be on the
28:01profit side but I'm not good with the
28:04transportation assets whatever required
28:07and that software required and how
28:10vehicle routing can be done so even then
28:12I will Outsource so this is a very
28:15simple example you can go through how
28:17why we are going for that right so
28:19another benefit is specialized expertise
28:23let's say I'm
28:24Hospital why I'm known for for providing
28:27you the healthare care services right
28:30but there is very important part of
28:32healthcare industry is how you are
28:34managing your healthare waste so doctors
28:37are providing the healthare services but
28:39it is their responsibility because that
28:41infectious waste is generated from the
28:43hospital but if I'm just you just
28:47imagine doctors are always engaging
28:49their skills how they can manage the
28:52waste and because they are not expert
28:55how they can manage the Infectious waste
28:58this managing the waste is all together
29:00different industry maybe they know some
29:02measures how they can uh you know
29:05protect the environment from the
29:06infection spread of infection but still
29:09still we cannot we cannot just rely on
29:12the hospital so their main services are
29:14providing healthcare services so let us
29:16Outsource this waste management process
29:19to some third party who is already doing
29:22that right so that means you will get
29:25expertise focus on your core
29:27competencies you focus on your core
29:30competencies that how you can uh inhouse
29:34all the test required you know to uh
29:37monitor the patient Health how you can
29:39maintain the patient records how you can
29:41maintain the inventory of the medical
29:43equipment you just focus on your core
29:45capabilities scalability and flexibility
29:48so I told you Outsourcing if you are you
29:52can scale down your business you can
29:53scale up your business whenever required
29:5550 orders you are getting you deliver 50
29:57ers using sigi network if you need more
30:00than that you get those many you process
30:03those many orders efficiency and
30:05productivity will be improved because
30:07that non-performance area or non value
30:10adding activity sometimes or maybe where
30:12you are not competent you are
30:14Outsourcing that right so in that way
30:16you will be more efficient risk will be
30:18shared with all the partners risk
30:21related maybe compliance and
30:24Regulatory let's talk about the another
30:27this industry only Healthcare waste so
30:29this waste means again you know uh so
30:33many different agencies are there World
30:36Health Organization is there then
30:38environmental agencies within India who
30:40are regulating all these waste and so
30:43many you know uh regulations are there
30:46so you need to meet those regulations so
30:48as a doctor you should focus on treating
30:51the patient or you should focus on how
30:52you can meet the regulations but those
30:55Meeting those regulation is very very
30:56important part so let us Outsource then
30:59so we can share the risk enhanced
31:01focused on customer s satisfaction
31:03because now you are completely focusing
31:05on your patients so you can enhance the
31:08uh your Proficiency in that so another
31:13limitation you will lose control when
31:15you are going for strategic Alliance you
31:17are Outsourcing distribution so Waste
31:21Management you Outsource to some other
31:23party so you said within every 24 hours
31:26you should you should take take our
31:28waste away and treat it now sometime
31:30he's coming within 24 hours sometime
31:32he's coming 30 hours 35 who will keep
31:35the track even if you are keeping the
31:36track of all those activities but then
31:39it is very difficult to push that
31:40because many are not there right so that
31:44way on quality timeliness and overall
31:47performance somewhere you are diluting
31:50it's not that you cannot push your
31:52vendors but when you have multiple
31:53vendors you can push as well but still
31:56you don't control complet completely
31:58them communication and coordination is
32:00also very big challenge any change you
32:02are doing in your uh manufacturing
32:04process in your product design Services
32:07design you need to collaborate with the
32:08partner because partner has to change
32:10the raw material as well right and then
32:13whether your if overseas partners are
32:15there whether they are ready to change
32:18so frequently so then all barriers will
32:21come there you know language barrier
32:23cultural barriers maybe you are uh uh
32:26suddenly you are going you were into
32:28education industry and suddenly you are
32:29going into some liquor industry let's
32:31say right you are expanding so whether
32:33your stakeholders will be ready to do
32:35that or they will feel that right
32:37because totally two different area
32:39quality and performance like I told you
32:41somewhere you don't have the complete
32:44control dependency for delivery so if
32:48anything goes wrong at the vendor end
32:51delivery will be delayed right so then
32:53you are more dependent for Quality more
32:56dependent for delivery of the product
32:57product otherwise if any disruption is
33:00there your production line will stop
33:02obviously when you are collaborating you
33:04are sharing the secret of your success
33:07secret of your recipe how you are
33:10manufacturing all those things you are
33:12sharing with your stakeholder so that
33:14means that security
33:16confidential uh things you are sharing
33:19with the partners hidden cost is Al
33:21initially obviously this we are doing
33:24Outsourcing for reducing the cost but
33:26there is hidden cost right indirect cost
33:30it's not only the cost you are acquiring
33:31the raw material for acquiring the raw
33:33material you are negotiating with the
33:35vendors you are preparing all the
33:36contractual documents any dispute
33:39happens you need to deal with the
33:41disputes as well right so that will also
33:43carry certain cost negative impact on
33:46the internal Workforce let's say if we
33:48are doing something here right and
33:51tomorrow let's say we are recording
33:52lectures here tomorrow nptl will
33:53Outsource this something to some other
33:56agency let's say right so then then
33:58there will be you know dissonance kind
34:00of behavior that we were doing this we
34:02were doing fairly enough fairly well
34:04with the uh students and they were you
34:06know in imparting this education to
34:09students who are you know far away from
34:11us they can also get access to that so
34:14that that means that dissatisfaction
34:16will be there right so if you will
34:18Outsource something uh uh to some other
34:21partner so already I discussed make and
34:24buy decision all this this is not only
34:28these many cost you will consider what
34:30if you'll make inhouse and what you will
34:32if you'll make if you'll Outsource so if
34:36that cost is less than this you
34:38Outsource loss you Outsource here right
34:41but at this point for that particular
34:44supplier it will it will not be lost
34:47because he is producing for other
34:50players so for us the quantity is less
34:52than the qar for them this quantity is
34:56big enough to produce so they can
34:58minimize the total cost shipping cost
35:01inventory cost they can hold that much
35:03you know raw material then again if
35:06we'll see make and buy decision on
35:08another parameter let's say advantages
35:11of making are very high and risk tied to
35:15buying very high so that means when risk
35:17is very high when you are Outsourcing
35:19risk of sharing your secret you know uh
35:22success strategy so then you will
35:25strongly go for making in-house but when
35:28it is very low risk is also very low
35:31advantages are very low you buy it
35:33Outsource it but somewhere in between
35:36when you are there so you can some some
35:40this this is also possible maybe in
35:44Northern you are there so you can
35:46produce there but in South you are
35:48expanding now in South you can Outsource
35:51to someone that also can happen right so
35:53moderate Outsourcing can also be there
35:56another thing on which you can go for
35:58outsourcing when you need strong control
36:01over the product or Services what you
36:03are offering to the market then then you
36:06need you know you need to make inhouse
36:09right so like if I'll talk about Zara
36:13zaraa is known as for fashionable
36:15products so for standard products they
36:18are Outsourcing to cheaper
36:20locations right to Asian locations for
36:25fashionable products which where they
36:27are changing very frequently they are
36:29producing in Europe only right so this
36:31is very good example because for
36:34fashionable products they are charging
36:35high they want more control over quality
36:38but for big products they are
36:40Outsourcing to some other Pender where
36:43they can you know cut down the cost if
36:45we'll talk about Walmart we'll come here
36:48so if standardized products if any
36:50standardized product is there if you are
36:53selling you know any extended t-shirt
36:56you are uh selling those commodity
36:59products where you know you don't have
37:01much to control so you can go for
37:03outsourcing in that case how you can
37:06Implement a successful make or buy
37:08strategy first you need to already we
37:11discussed whether you should make or buy
37:13what you should make make what should
37:15you should buy you need to analyze the
37:17cost and expertise whether you have that
37:20expertise that you prepared very
37:22beautiful design let's say apple
37:24prepared very beautiful design but that
37:27design can you mature that design
37:30commercialize that design of your own
37:33because sometimes because you need to
37:36you know then they are Outsourcing to
37:37China right so then we need to evaluate
37:40the quality right and then for those
37:43quality parameters whether you need your
37:46own control or you can still believe in
37:48your stakeholders your partners right
37:51then you need to consider the capacity
37:53of the stakeholders right and your cap
37:55capacity as well and what what if you
37:57need to scale up or scale down the
37:59business because of the uh demand
38:01fluctuations you can go for a kind of
38:04pilot survey case study right where
38:06maybe you can analyze some other players
38:08what they are doing in the market and
38:11then you can go for implementing
38:13complete successful strategy we'll just
38:15quickly go through couple of cases how
38:17they are doing that like I told you
38:19Apple very good with your you know
38:22product design right so and updating the
38:26software right so software development
38:29part and they are designing the products
38:31in United State but they are finding the
38:34cheap locations in China where they can
38:37cut down the production cost they are
38:39investing huge in R&D but you see they
38:43are doing the uh development part in US
38:47Manufacturing in China again selling
38:49products in us right so this is the
38:52beauty of supply chain still you are
38:53managing the cost another very good
38:55example Nike where they are you know
38:59they are Pioneer in designing the
39:01products if you are bearing Nike shoe
39:03the comfort you can feel right and they
39:05have developed that image over the time
39:08with the customers where they are you
39:10know preferring the Nike shoes and
39:12branding how they are branding their
39:14product but again they they don't have
39:17those capabilities to produce that to
39:19commercialize that that much quantity so
39:22then again they are Outsourcing to some
39:24other partner so again they can leave
39:27Lage the strength and gain the
39:29competitive advantage over their you
39:32know competitors because manufacturing
39:34also they are cutting down the cost and
39:36providing the high quality Comfort shoe
39:40to the customer right because
39:42manufacturing they are cutting down the
39:43cost but on designing part they are
39:46spending High another example is Google
39:49you know Google is known for as search
39:52engine we most of the you you also can
39:56cannot track how many times we are
39:58Googling the things right so that means
40:00anything you need to know you are just
40:02entering into the Google right if even
40:04if you want to know you know some
40:07products even then you will enter even
40:09if you want to know some healthcare
40:11hospitals near to you you are so other
40:14than search engine now they are
40:15providing so many different platforms
40:18they are their main business is not they
40:20are providing almost free products right
40:23if you are Googling something that is
40:25free information you are getting is free
40:27right right so if you are checking
40:28nearby your hospital that is also free
40:30if you are using Google Map is free they
40:33are how they are making money they are
40:35making money by selling apps and then
40:38the advertisement cost right so if I'm
40:43searching some product on Google that
40:45means I need that product now those you
40:48know branding organizations can use this
40:52data can analyze this data can send me
40:55targeted advertisement and then they can
40:57generate the revenue this is how Google
40:59is making Revenue they're selling apps
41:01to uh Play Stores right so uh this is
41:05another very beautiful example what they
41:07are doing they are just they they have
41:10developed that platform where you can
41:12search and what you have whatever you
41:14are searching is a kind of information
41:16and that information is valuable for
41:18them so in this uh session we discussed
41:21about the different options of strategic
41:24Alliance we discussed how we can go for
41:27our Outsourcing vertical as well as
41:29horizontal Outsourcing we discussed
41:31about vertical Outsourcing where we
41:32talked about you know forward
41:34integration or backward integration
41:36right we talked about what are those
41:38factors which are forcing us to go for
41:40uh Outsourcing it's not only forcing if
41:42we are producing something out we are
41:45Outsourcing and we are getting higher
41:48margins why don't we go for that right
41:50so and then we are getting the expertise
41:53right so as a doctor you are all
41:56completely involved in treating the
41:58patient why don't you means Outsource uh
42:03if you are you know testing part is also
42:05there so they have Outsource all the
42:07labs pathologies right so and then waste
42:10management is another key area which is
42:13which requires attention but then
42:15because we are limited to providing the
42:17healthcare services let us out Outsource
42:20this to third party who can you know
42:22manage this more efficiently because
42:25they will charge us for only the waste
42:28today we are generating tomorrow if we
42:30are generating higher waste they will
42:32charge less uh higher day after tomorrow
42:35again if waste is reduced so they will
42:37charge for that only so in that way we
42:39can you know maintain the economies of
42:41scale scale we can scale up scale down
42:43the business right so this is all about
42:46how we can go for outsourcing right in
42:48the next session we'll discuss about how
42:51we can develop the Strategic
42:53relationship with the partners and how
42:55we can evaluate the partners and pick
42:57those selected Partners so that's all
43:00these are some of the references you can
43:02go for thank you very much

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