Executive Summary Example
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School
North Carolina State University *
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Course
474
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
doc
Pages
2
Uploaded by AdmiralComputerMole24
Situation
You are a procurement manager leading an insource vs. outsource (make-or-buy) review team for wire harnesses for a division of a $5 Billion annual revenue U.S. construction equipment manufacturer, Equipco. Manufacturing is located in a plant in Lumberton, North Carolina, and is known by customers to produce high quality, reliable construction equipment, such as bulldozers and backhoes. You have been assigned the
responsibility of analyzing whether Equipco should outsource or internally manufacture a newly designed wire harness, used on the company’s construction equipment, which will replace the old design. Please note – This Example is NOT a topic of ANY of your cases – you should only focus on the STRUCTURE of the summary, not the content.
Wire Harness Outsourcing Recommendation Executive Summary
The cross-functional team recommends that Equipco outsource the manufacturing of wire harnesses to Harnessco vs. manufacturing internally. Wire harnesses are low value, easy to manufacture, low technology components, and are not a core competency of Equipco. Outsourcing to Harnessco will provide $5 million in cost savings over the next 5 years. In addition, wire harnesses produced by Harnessco will be of higher quality and technical capability than if Equipco produced the wire harnesses internally.
1) Concentration on core business
: Focusing on the core business is important for Equipco to be successful in this industry and wire harnesses are not core to the business. Equipco‘s core business is to provide high quality, reliable construction equipment. Wire harnesses are small sub-components used in manufacturing of these large machines and in fact, wire harnesses make up less the 0.1% of the value of the completed machine. Manufacturing these components takes away valuable manufacturing space and engineering talent from higher value components and sub-
assemblies.
2) Cost Savings: Outsourcing will help to keep costs down - an important factor to compete in this industry and improve profitability. As per our cost analysis in Exhibit 1A, outsourcing to Harnessco would save Equipco $2.5 million in cost over the next 3 years and $5.0 million over the next 5 years. Furthermore, it would eliminate the need to purchase $500,000 worth of additional equipment and tooling required to make the wire harnesses in Equipco’s plant. The 15,000 square feet of manufacturing space freed up by outsourcing can be productively utilized by another, more valuable component, improving asset utilization.
3) Higher quality: Quality and performance are important to customers in the construction equipment industry and outsourcing the wire harness will improve Equipco’s product in both of these areas. According to production and engineering data (see Exhibit 1B), Harnessco’s wire harnesses are of superior quality and technical capability than Equipco produced wire harnesses. Harnessco’s volume of manufacture is 10 times larger than Equipco’s and Harnessco spends 15 times more in research and
development. Harnessco has been rated by “Wire Harness Monthly” as the top manufacture in the world for the last ten years.
In conclusion, we believe that Equipco should outsource manufacturing to Harnessco to
focus on core competencies, save money, and improve both quality and technical capability. Although moving to an outside supplier has risk, we have assembled a transition team composed of the product manager, manufacturing engineer, and procurement manager to work with Harnessco. We have a risk management plan and a project plan that meets the timeline for our product launch and are confident we will overcome the obstacles to this transition of wire harness production to Harnessco.
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