The Make-Buy decision is the process of deciding whether to produce a good or service in-house (insourcing) or to procure it from an external supplier (outsourcing). This decision is often driven by factors such as cost, expertise, and availability. The disadvantages of insourcing are that it can be costly and time-consuming, and there is often a lack of control over the process (Bowersox et al., 2020). Several companies, such as Apple, have been focusing on gaining a competitive edge in their relevant business scope. Some of the competitive advantages expected are lowering costs, high-quality production, and outstanding customer service flexibility. Apple company is one of the companies that are successfully transitioning from insourcing to outsourcing with the intention of producing the needed quality at a lower cost at the required time.
There are many companies that have successfully transitioned from insourcing to outsourcing, but one of the most notable is Apple. In the early days of Apple, the company relied heavily on insourcing, assembling its products in-house. However, by the late 1990s, Apple had outgrown its ability to produce all its products internally and began outsourcing to contract manufacturers like Foxconn (Cassidy et al., 2019). Today, Foxconn is responsible for producing most of Apple’s products, including the iPhone and iPad. Foxconn has come under scrutiny in recent years for allegations of poor working conditions and labor violations. Apple has defended its partnership with the company and insists that it takes measures to ensure that workers are treated fairly.
Apple shifted from insourcing to outsourcing its services due to three key factors: flexibility, creating a talent pool, and cost-saving. Outsourcing work functions allows businesses to adapt quickly to changing market needs and demands (Qi et al., 2017). They can similarly take advantage of global talent pools and save on costs by outsourcing work to lower-cost regions. Apple outsources the manufacturing of its products to Foxconn in order to especially save on costs. While Apple still maintains a high degree of control over the production process, by outsourcing to Foxconn, it can reduce its own manufacturing expenses. This arrangement has been successful for both Apple and Foxconn and has allowed Apple to keep its prices competitive while still maintaining healthy profit margins (Qi et al., 2017). On the other hand, Foxconn provides a large talent pool that Apple can draw from to create its desired products. Through outsourcing its services to Foxconn, Apple focuses on what it does best, which is creating innovative products.
Moreover, Apple decided to create a talent pool by outsourcing its services to Foxconn for several reasons. First, Apple wants to complete its products in a shorter time frame and have them ready for the consumer market quicker. This has always allowed the organization to release new products more often and gain a competitive edge (Cassidy et al., 2019). Second, Apple hoped to reduce manufacturing costs by outsourcing production to Foxconn. By having Foxconn handle production, Apple would not have to spend as much money on machinery, factories, or labor. Finally, Apple planned to use Foxconn’s extensive knowledge of electronics manufacturing and assembly to improve the quality of its products.
Conversely, flexibility is critical for any organization in today’s rapidly changing business environment. The ability to adapt to new circumstances and adjust quickly can mean the difference between success and failure (Bowersox et al., 2020). For a company to succeed, organizations must be able to change direction quickly, respond to new opportunities, and experiment with new ideas. Flexibility also allows organizations to be more responsive to their customers’ needs (Bowersox et al., 2020). By rapidly adapting to changes in client demand, they can better meet their customer’s expectations and keep them happy (Bowersox et al., 2020). In today’s constantly connected world, where customers can easily take their business elsewhere if they are not satisfied, it is vital that companies do everything they can to attract and retain them. Therefore, Apple company had to outsource some of its activity to achieve flexibility.
When Apple outsourced its manufacturing to Foxconn, it transformed the company in a number of ways. First, it led to an increase in production efficiency and quality control. Second, Apple was able to cut costs by moving production to Foxconn’s lower-cost labor markets. Third, since Foxconn is a contract manufacturer, it allowed Apple to establish greater control over its own product designs and branding (Cassidy et al., 2019). Finally, the outsourcing arrangement aided Apple in better managing its inventory levels and just-in-time manufacturing process. Ultimately, these factors resulted in a stronger financial performance for Apple.
In conclusion, Apple is the company that has been successfully transitioning from insourcing to outsourcing its manufacturing services; outsourcing has always been performed by Foxconn. Some of the key factors that have led to outsourcing decisions are cost saving, flexibility attainment, and having a talent pool to ensure quality work provision. Apple outsources its services to Foxconn to save on cost, gain operational flexibility, and provide high-quality products. Foxconn can offer lower costs because it is a large company with many factories. This allows Foxconn to produce goods at a lower price than smaller companies. Foxconn likewise has a flexible production process that can quickly adapt to changes in demand. This helps Apple avoid the problems that often occur when there is an increase or decrease in demand for its products. Finally, Foxconn is known for having high-quality standards; this ensures that Apple’s products are consistent and of the highest quality.
References
Bowersox, D., Closs, D., Bixby, M., & Bowersox, J. (2020). Supply chain logistics management (5th ed.). New York, NY: McGraw-Hill.
Cassidy, C. M., Gravois, R., & Solomon, S. (2019). Outsourcing to China: The benefits and consequences of Foxconn’s strategy. Southeast Case Research Journal, 16(1), 8-39. Web.
Qi, Y., Huo, B., Wang, Z., & Yeung, H. Y. J. (2017). The impact of operations and supply chain strategies on integration and performance.International Journal of Production Economics, 185, 162-174. Web.