Please answer the question 3 of the case study with full explanation and reference to the provided tables consider the advantages and disadvantages of both options insourcing and outsourcing that affect the decision of choosing one over the other. CASE STUDYPagoda.comIntroductionPagoda.com is an Internet service provider (ISP) that caters toindividual consumers and small businesses who require a highlevel of service and are willing to pay a premium for it. Spe-cifically, Pagoda.com offers state-of-the-art email applicationsand Web-building software, as well as plenty of storage spaceand the fastest access available. The marketing vice president,Jerry Hunter, puts it this way: "There are a lot of companies outthere promising the cheapest Internet access. But what do youget for your money? Slow- or no-access and an endless streamof system crashes. And I won't even mention the lack of sup-port if you have a technical question! For a few dollars more amonth, we give our customers the environment they need tobe productive. It's no surprise, then, that we have the highestcustomer satisfaction and retention rates in the industry."The Online Help DeskOne of Pagoda's services is its online help desk. The onlinehelp desk works as follows: Customers who are experiencingtechnical problems, or who simply have questions about theiraccount, enter a one-on-one chat room, where they can interactdirectly with an expert. Problems are usually resolved within 10minutes, and customers have listed it as one of the top three rea-sons they stick with Pagoda.com. Presently, Pagoda has enoughcapacity to handle up to 900,000 requests per year, althoughmanagement doesn't expect the number of requests to changemuch from the current level of 800,000 per year.A firm located in New Delhi, India, has approachedPagoda about outsourcing the online help desk. The offer isattractive. The New Delhi firm's own personnel would handlethe help desk function. These personnel all speak English flu-ently and have college degrees or appropriate technical back-grounds. And because they are located in India, labor costswould be a fraction of what they are in the United States. Thesavings would be passed on, in part, to Pagoda. And since the220 PART III ESTABLISHING SUPPLY CHAIN LINKAGES4. A statement of work typically specifies performancemeasurements that the buying firm can use to determinewhether the service provider is meeting the terms of thehelp desk chat room exists on the Internet, Pagoda's customersshould be unaware of the switch.Pagoda management has put together the following fig-ures, outlining the yearly costs associated with the current sys-tem and the Indian proposal:Current Online Help DeskPersonnel costs:40 full-time-equivalent (FTE) technical experts @ $40,000per year (salary and benefits); 3 supervisors @ $70,000each per year (salary and benefits)Equipment costs:4 servers @ $2,000 per year20 PCs@ $1,000 per yearVariable costs:$1.50 per request (office supplies, fax paper, etc.)New Delhi ProposalFixed cost:$1,500,000 per contract year (to cover administrative andIT costs)Charge:$0.50 per requestQuestions1. Calculate the total cost of outsourcing the online helpdesk versus staying with the current solution. Whichoption is cheaper?2. What other factors, other than costs, should Pagoda con-sider? How would you weight these factors? Given theabove, how might you use a weighted-point evaluationsystem to evaluate the two options?3. Should Pagoda.com outsource its online help desk? Whyor why not? Be sure to consider Table 7.7 and 7.8 whenframing your answer.contract. What performance measurements would yourecommend be put in place? What should happen if theservice provider fails to meet these requirements? TABLE 7.7Advantages andDisadvantages ofInsourcing andOutsourcingTABLE 7.8Factors That Affectthe Decision toInsource orOutsourceADVANTAGESHigh degree of controlAbility to oversee the entire processEconomies of scale and/or scopeADVANTAGESHigh strategic flexibilityLow investment riskImproved cash flowAccess to state-of-the-artproducts and servicesCHAPTER 7 SUPPLY MANAGEMENT 201InsourcingDISADVANTAGESReduced strategic flexibilityRequired high investmentPotential suppliers may offer superior products and servicesOutsourcingDISADVANTAGESPossibility of choosing a bad supplierLoss of control over the process and core technologiesCommunication/coordination challengesIncreased risk of supply chain disruptionCustomer social responsibility (CSR) risksEnvironmental uncertaintyCompetition in the supplier marketAbility to monitor supplier'sperformanceRelationship of product/service tobuying firm's core competenciesFAVORSINSOURCINGLowLowLowHighFAVORSOUTSOURCINGHighHighHighLow

With outsourcing there is annual saving of 1.14 Million Dollars

Answered: Please answer the question 3 of the…

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...