Facilities Management Outsourcing In The UK Information Technology Essay

Facilities Management Outsourcing In The UK Information Technology Essay Chapter One served as an introduction to the dissertation, forming the motivation for the research project on the facility management outsourcing in the UK, together with a brief discussion on factors embodied in the study. Factors such as the problem, literature review; research methodology and limitations of the study are discussed. This is the appropriate theoretical paradigm of the study, the main focus of which is to specify the facility management outsoaring trend in the UK, together with related concepts. In the next paragraphs, As per research literature author discusses the definition of outsourcing, to understand the meaning of outsourcing from different views of various authors, and thus lead to conclusions of what outsourcing means. Outsourcing is the long-term results-orientated relationship with an external service provider for activities traditionally performed within the company. Burn et al., (2002) say Outsourcing usually applies to a complete business process and implies a degree of managerial control and risk on the part of the provider. Aaratunga et al.(2008) is in the favour of FM, according to him FM helps organizations as well as employees as a whole to get the full benefit by the integration of property and user related functions. It provides dynamic facilities policies which help in the generation of corporate values. It reduces the problems of space allocation and charging. In improving the environmental condition it can be a great help. Direct and contract employment can also be improved by the introduction of FM. Facility management  is an  interdisciplinary  field primarily devoted to the maintenance and care of commercial or institutional buildings, such as  hotels,  resorts,  schools,  office complexes,  sports arenas  or  convention centres. Duties may include the care of  air conditioning,  electric,power,  plumbing  and  lighting  systems;  cleaning;  decoration;  grounds keeping  and  security. Some or all of these duties can be assisted by computer programs. These duties can be thought of as non-core or support services, because they are not the primary business (taken in the broadest sense of the word) of the owner organization (Alexander, Keith, 1996). According to Barrett (1995) there are three approaches for opting the whole of FM services or part of it namely; out-sourced, in-house or a hybrid of both. The firm can choose any of the approach in order to get the FM services. The approach taken by the firm depends on the concerns or priorities already decided by the firm. In case of support providers some organizations goes for the totally in-house option, while some are in the favour of certain main services which are possible, the third type of organization is the one who uses the combination of both. Many companies have realized that in order to add value to its customers, they must single-mindedly concentrate on their core competencies and leave the running of vital, but yet time consuming and labor intensive peripheral activities to other more qualified operators confirms Sherratt (2000). 2.2. What is outsourcing Outsourcing means to have a contract with another company or person to do a particular function. Now a day almost every organization outsources some of its departments in some way. Usually, that function is being outsourced which is considered non-core to the business. Outsourcing takes many forms. Organizations still hire service providers to handle distinct business processes (Sourcingmag, 2009). Source: MacroTechs business process outsourcing model A term often used in the context of outsourcing is vertical integration. Vertical integration refers to the level of ownership of activities either backward into the supply chain or forward towards the customers or end-user of the product and service. Vertical integration is similar to the outsourcing concept in that it is concerned with the decision on whether to perform an activity internally or source it from an external supplier. Another term that is often used in manufacturing context is make-or-buy. It is arguable at make or buy is most appropriate term in context of outsourcing as it implies that there should be an evaluation of the suitability of either internal or external supply whereas the term outsourcing implies that the decision to use an external supplier has already been made without any consideration whether is it appropriate for the organization. Its necessary for the successful application of outsourcing to analyze whether it is necessary for the organization and h ow the outsourcing process should be managed (McIvor, Ronan, 2005). 2.2.1 Reasons behind outsourcing In todays business evolution, companies seek to remain strong or gain strength in an ecommerce-enabled marketplace. Likewise the factors driving outsourcing have evolved from a focus on solving financial problems to IT or certain business processes which contribute to the competitive success of an organization through enhanced capability, improved flexibility, increased efficiency or enhanced speed to market. Outsourcing has evolved from a survival tactic to a strategic competitive tool touted by even the most respected management consultants says Van Bon (2002:249). The areas which have not run on traditional lines can be introduced by the new ideas, technologies and new findings with the help of outsourcing which has a great positional in bringing the businesslike approach. It can help in upgrading the system or skills of the workers. It has a potential in bringing the reduced cost technologies by specializations and large scale economies. Outsourcing can help in upgrading the assets (Beitz,1998). Accoring to Heath (2010) outsourcing facilities management enables an organization to focus on its core business functions. Organization can gain many value-driven and many less visible benefits including:- Flexibility Increase and decrease staffing levels as needed, without having to interview, hire, or train a new employee or be forced to lay off employees when business slows. Productivity Because you are tapping into a pool of well-trained professionals who have access to the best processes, you immediately increase your productivity. Expert Assistance Rely on experts in facilities management to ensure that your company is operating efficiently and cost effectively. Better Service By having the right personnel available to handle your facility management issues, your customers will benefit as well. The cost-savings alone can make outsourcing management an attractive idea; instead of paying salary, bonuses, benefits, and taxes, as well as the administrative costs associated with those items, organization willl simply pay a flat rate that makes it easy to budget and plan. 2.2.2 Outsourcing relationship management process (the modern outsourcing model) In the new era of outsourcing, the customer regards the vendor as a long-term asset that is a source of ongoing value to the company. An asset, time and resources are dedicated to the management of a relationship, thereby maximizing its value. The customers resources are held accountable for extracting value from the outsourcing relationship. This is a more strategic approach. Good relationship management requires thought, planning, coordination and dedication of resources to be successful. Management cannot overlook the importance of this structure and its supporting processes. Good relationship management can be used to fix many ills inherent in a sourcing transaction. While this area of expertise is relatively immature, it is nonetheless important if the promise of outsourcing is to be realized concludes Van Bon (2002). Often a person called the client contract manager of an outsourcing deal is left to determine what was just negotiated after the outsourcing contract is signed. Van Bon (2002: 258) has shown that in a lot of situations this is a recipe for disaster, when it comes to realizing the benefits of outsourcing. Fortunately in todays world, organizations realize the importance of processes and a sound governance model by the time the deal is finalized. The big questions to be asked is how does one go about building into the process and how does one operate the process after an outsourcing deal is done? When an outsourcing deal has taken place, interdependency exists between the two companies. Both the vendor and the customer therefore change, as the one affects the other. Therefore both parties must understand the cost drivers of the two infrastructures and coordinate changes so as not to introduce additional costs into the process. Both the customer and the vendor must behave as an integrated supply chain rather than as win or lose adversaries. MTW (2010) found in this research that the FM market has become increasingly characterized by closer relationships between suppliers and contractors, as greater efficiencies and lower procurement costs are sought. During 2009, several FM companies established programs specifically designed to improve supplier relationships to ensure that material and equipment suppliers were aligned with customer relationship principles and accountable for their own supply chains. 2.3. Types of outsourcing For the purpose of this study and based on the area of study on which the author is focusing, there are two types of outsourcing models identified by Greaver, F. Maurice (1999):- Total outsourcing: In this type of outsourcing, organizations outsource all of their activities. It is easiest way to in the easiest way to get good results with less effort. Service provide so same things but they produce better results, mostly organization choose it as it saves money. Selective outsourcing: Some times organization does not want to outsource all the activities of an individual, function or process. In Facility Management industry if an organization wants to outsource its whole building control but keeps automated entry exit control in their own system to make sure who come in and leaves the building and when. Most successful experiences were associated with a reasoned, incremental and selective approach to outsourcing which is increasingly reflected in the structure of the market confirms Willcocks and Fitzgerald (1994). Table 2.1 Types of Outsourcing and the risks associated with them. In-house Commitment Selective Outsourcing Total Outsourcing Total Attitude Core Strategic Asset Mixed Portfolio Non-Core Necessary Cost World Class Provision Providers IT Employees Loyal to Business the Horses for Courses Vendor Strategic Partner Emphasis Value focus Value for Money Money Added Value? Dangers High Cost Insular Unresponsive Management Overhead Exploitation by Suppliers Unbalanced Risk/Reward Innovation Source: Alexander (1996) This table 2.1 shows that all arrangements have inherent risks associated with them, in addition to the above types of outsourcing, Other types of outsourcing services as defined by Glomark-Governan (2006) include Business Process Outsourcing (BPO) which involves the transfer of management and execution of one or more complete business processes or entire business functions to an external service provider. Research done by Currie and Willcocks (1997:180) concludes that most companies chose selective outsourcing. In the United States only 8% has gone total outsourcing and in the United Kingdom only 2%. This figure as low since total outsourcing is very risky. Data collected on total outsourcing indicates a 35% failure rate. With total outsourcing, vendors build in a high switching cost. Total outsourcing should be done on a joint risk-reward basis and never on a fee-for service (time and material) contract. It is recommended that re-negotiation stages be included in the original contract of big deals. 2.4 Advantages of outsourcing Turban et al. (2002) describes following advantages of outsourcing FINANCIAL Avoid heavy capital investment, thereby releasing funds for other uses Improve cash flow and cost accountability Realize cost benefits from economies of scale, and from sharing computer housing, hardware, software and personnel Release extensive office space TECHNICAL Be free to chose software due to a wider range of hardware Achieve technological improvements more easily Have greater access to technical skills MANAGEMENT Concentrate on developing and running core business activity Eliminate need to recruit and retain competent FM staff HUMAN RESOURCES Draw on specialist skills, available from a pool of expertise, when needed Enrich career development opportunities for staff QUALITY Clearly define service levels Improve performance accountability Earn quality accreditation FLEXIBILITY Respond quickly to business demands 2.5 Disadvantages of outsourcing In spite of the numerous advantages mentioned above, there can also be less desirable consequences. Most concerns are explored further (Bucki, James. 2010). Availability: The external provider is not always available full time and may be committed to other clients. Confidentiality: The vendor will probably need to keep some of the customers records off-site while simultaneously working with competitors. Cost: The customer may perceive that unit costs for the external provider are high. Termination costs of an agreement can also be very high. Perceived lack of accountability and commitment: There is a possibility that a customer can end up with a provider that does not share the risks of the client and is committed to the agreement. 2.6 Outsourcing decision making Research done by Caruso (1996) found that the decision to outsource non-core competencies takes place at corporate level in 50% of the cases. A third takes place at the divisional level and 15% at operational level. Normally other departments such as finance, Marketing and Human Resources are also involved in the decision. These departments play a significant role in the selection process. The final decision on which vendor to use is done at corporate level. Glomark-Governans (2006) also found that the finance department is involved with the cost calculations and the Human Resources department concentrates on the smooth transition of employees. The Human Resources department is also responsible for monitoring employee moral throughout the company before, during and after the outsourcing transition has taken place. The Marketing department would then explain the new strategic relationship of the company with the vendor customer and concentrate on the benefits the customer will reap from the outsourcing arrangement. Vendors should be selected based on their total capabilities, not just price or a single aspect of what they can do. References and reputation are only two of the criteria that should be used when making the final decision on which vendor to contract. A reasonable price should be negotiated and performance measures put in place. When selecting a vendor, close attention should be paid to how candidates measure up in the areas of financial strength, business experience, business development, support services and business arrangements. Willcocks et al., (1997) also found that assessing outsourcing intangible benefits also requires a careful investigation of links between the technical, the operational, and the economic effects of the benefit. The result provides a sound framework for identifying the measurable variable needed for the economic quantification. As a simple example: Technical benefit an on-line sales force Web service enables sales professionals in a company to produce reports with key content designed for executives in their accounts. Operational benefit with the new reports available, the sales representatives can increase the number of meetings with senior managers in their accounts Economic benefit an increase in meetings with senior managers will increase the close rate. The close rate (number of orders closed as a percent of proposals presented) is the measured variable that can be used to define the benefit formula (means of economic quantification). 2.7 Facilities management outsourcing Since cresting as a trend in the mid-to-late 80s, the outsourcing of facilities management has now simply become a way of doing business. In the last decade, many facilities managers have exchanged the traditional carts and hard hats for seats in boardrooms with titles like VP of capital assets or VP of real estate. At meetings, they build strong cases for maintaining existing facilities; persuading their brethren that buildings which hold their value are as important to the core mission of their organization as developing a new product or pouring millions into new research (Helene, McEntee, 2000). Facilities management has changed significantly since the early 1990s. In the early days, such tasks were decentralized. Store or district managers made service vendor selections and managed repair decisions. Often, those providing services were relatives or friends. The corporate headquarters usually had no view into facilities issues at the store level (Barrett, P.,  Baldry, D., 2003). By the mid 1990s, centralization became the norm. Major tasks, such as procurement and new construction, became centralized at the home office to achieve buying power. Centralization also found its way to facilities management. Facility maintenance departments began to grow, adding headcount to manage the needs of multiple locations while offloading tasks from onsite managers (Barrett, P. Baldry, D., 2003). By the late 1990s, web-based management solutions emerged, known as computerized maintenance management systems (CMMSs). The promise of a CMMS was the connection of all interested parties, including the store manager, facilities manager and service vendors. Unfortunately, service providers often did not have computers and the malls were not connected to the Internet, leading to system inefficiencies (Nakayama, M. Sutcliffe, N. 2005). By about 2002, affordable Internet access and the proliferation of broadband connections led to the emergence of powerful new facility management solutions. Leveraging portals and email, facilities management was embracing modern technology to improve communications and accountability (Nakayama, M. Sutcliffe, N. 2005). Blumberg (1998) presents new viewpoint to explain the FM outsourcing in terms of its positional benefits. FM outsourcing provides the organization many benefits. It helps in reducing the cost of the organization that opt it as the service provider company provides high quality services with the comparatively low cost. It is useful in improving the operating efficiency as the workload is shared. The net effect will be on the returns, they will increase and In contrast to Bloomberg (1998) and Kotabe (1992), if organization outsource its FM sector it will lead to the loss of overall market performance. He says that innovation will be neglected in case of reliance on outsourcing. When outsourcer does not want to be innovative he outsources its FM as it is much easier in contrast to indulge in innovations. The end result is the decline in the technological advancements which is the base in the innovations in the product and process. According to Nutt (1999) FM is improving the overall efficiency of the organization. It is a huge deportment in establishing values for all the facilities seekers. Corporations, individual employees, clients, operating units are the chief facilities seekers. FM is growing day by day and because of its increasing demand this market has created a much more competitive marketplace. Different types of FM companies has been established to fulfil its increasing demand such as FM contractors, professional FM institutions, FM suppliers, FM consultants and in-house FM teams. 2.8 Developing a facilities management structure Atkin, B. Brooks, A (2009) states that for the efficient and effectively management of facilities, stout strategies must be developed in the framework of organizations strategic business plan and accommodation strategy. These strategy should include development of strategic objectives and a business plan for the FM function. The process of developing a Fm strategy is demonstrated in Figure 2.2, which shows three main stages with their elements. These three stages are:- Strategic analysis Developing solutions Strategy implementation Figure 2.2 Source: Atkin, B. Brooks, A (2009) There is no single formulation of facilities management that will fit all situations. Nonetheless, the concept of the informed client function is common to all situations. Most buildings represent substantial investments for organisations and usually have to accommodate and support a range of activities in the organisations core business, for which an appropriate environment must be created in buildings that may not have been designed for the purposes for which they are now used. Yet, no matter how well focused on organisation might be on its core business, it cannot lose sight of the supporting services the non-core business. The relationship between two is shown in the figure 2.3. Organisations may have already considered the distinction between their core business and non-core business (such as security, payroll or cleaning) as part of the drive to deliver customer satisfaction and achieve best value (Atkins, Brian Brooks, Adrian, 2009). Figure 2.3Source: Atkins, Brian Brooks, Adrian (2009). 2.9 Facilities management Information Technology History of computer-aided facilities management (CAFM) dates back to the early 1960s when space forecasting and inventory applications were first run on expensive mainframe computers by people writing their own programming codes. With the passage of time architectural planning and construction project management were added to the suite of applications running on the systems shown in figure 2.4. The number of people writing their own code based on office automation software increased dramatically with the advent of smaller computers. Islands of automation introduced in the market during 1970s and 1980s, CAFM began to be used for other applications such as furniture inventory, lease management, aqsset management, and building cost accounting CMMS application such as maintenance management, cable management and security began during late 1980s and 1990s during the end of 1980s internet was introduced and it was revolution in the automated system. Many firms created their own softwares t hose fits in their organization (National research council, 2001). Figure 2.4 Space Asset CMMS (Computerized Maintenance Inventory Management Management System) 1960sà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦1970sà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦1980sà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.1990sà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..2000s Mainframe > PC Islands > CAFM > Internet Source: National research council (2001) Today facilities managers use several software tools. Each of these tools processes and stores only specific information. Only FM specific tools are included in the following list, general tools like email, workflow, word processing belong to underlying IT base support (Redlein, Alexander, 2004). Computer Aided Facility Management Systems (CAFM) Geographic Information Systems (GIS) Enterprise Resource Planning Systems (ERP) Building automated Systems (BA including security systems) Management Information system (MIS) (Business Data Warehouse Systems) As mentioned above, all of the tools are engaged in the day to day objective process. Even in one field one toll alone cannot handle or support all the needed processes. The following table 2.1 shows how the main basic processes of FM can be supported by the software systems (James, R. Watson, R., 2009):- Table 2.1 Main processes and IT support Support of CAFM ERP BA Maintenance Drawing, equipment location Maintenance contracts, cost accounting, billing Technical data, status of equipment Space Management Drawing, current user Cost accounting, transparency Technical data Tenant management Current user Tenancy agreement, rental fee Technical resources Sales / Marketing Visualization, adaptation to customers needs Information systems, calculation Available technical resources Source: National institute of building sciences Computer-aided facilities management system (CAFM) There are many Computer Aided Facility Management (CAFM) tools available today. They have become an essential tool for increasing and maintaining the efficient use of space in your buildings. As a planning tool, CAFM can help by creating trial layouts and comparing space efficiencies. CAFM helps track and control the use of assets like furniture and equipment. CAFM can help allocate asset costs to operating units and track employee movements. Many CAFM applications have options to aid in scheduling the use of shared space or maintenance routines like landscaping or snow removal. CAFM also enhances the effectiveness of facility safety and security. Following benefits could be achieved by implementing CAFM system (Teicholz, Eric, 1995) Increased Efficiency of Asset Utilization Automates space charge-backs based on your billing and reporting requirements Link architectural drawings with facilities and infrastructure data, ensuring information is always accurate Allocates space usage and reports charge-backs with accuracy to avoid external or inter-departmental billing disputes. Enterprise Resource Planning system (ERP) ERP is back office software which focuses on the key business functions of manufacturing, supply chain management,  CRM, financial management and  Project Management. A well implemented ERP solution will improve the efficiency of the enterprise, reduce money tied up in stock/work in progress, and run a Just in Time inventory system (BBC, 2005). Building automated system (BA) Building automation  describes the functionality provided by the control system of a building. A building automation system (BAS) is an example of a  distributed control system. The control system is a computerized, intelligent  network  of electronic devices, designed to monitor and control the mechanical and lighting systems in a building (Redlein, Alexander, 2004). BAS core functionality keeps the building climate within a specified range, provides lighting based on an occupancy schedule, and monitors system performance and device failures and provides email and/or text notifications to building engineering staff. The BAS functionality reduces building energy and maintenance costs when compared to a non-controlled building. A building controlled by a BAS is often referred to as an intelligent building system (Daintree Networks, 2009). As it mentioned in the section 2.7 that in around 2002, affordable Internet access and the proliferation of broadband connections led to the emergence of powerful new facility management solutions. Leveraging portals and email, facilities management was embracing modern technology to improve communications and accountability (Nakayama, M. Sutcliffe, N. 2005). 2.10 The evolution of outsourcing in the FM market Companies have become more efficient at reducing costs, and this is sometimes difficult to do effectively through in-house facilities managers. They are often constrained by internal political pressures and vested interests, and often they lack the expertise to manage change. Change within a company is a major challenge to any chief executive. By outsourcing to professionals, the outsourcing company becomes the change agent and a company is able to re-engineer and reposition itself more quickly and efficiently says Jackson (1997). Figure 2.1 Trend in FM outsourcing Source: Holzhhauzen 1999:9 From traditional in-house facilities management, the trend moved towards contracting certain non-core competencies. It then developed into outsourcing non-core competencies to a number of outsourcing firms. The trend is now developing further to full facilities management, which takes the risk away form the customer and places it on the shoulders of a single vendor (Holzhhauzen 1999). Since the early 1990s FM has shows the tremendous growth, as different sectors and organizations are interested in control of operational efficiencies and cost. Now a day there is a trend in private companies to focus on the core competencies. So these companies are interested in adopting the outsourcing in order to increase the efficiency as well as output of a company (AMA Research, 2009). FM sector has shows tremendous success over the last 25 years. Many professional bodies are supporting the growing number of FM practitioners all over the world to establish this market as a worldwide brand. It has been controlled by the global network of FM educational providers who worked jointly with the professionals related to this field, they also have collaboration with the academic community which provides them with the unique and challenging ideas to develop this market. According to writer there is variety in the practice of FM but the main idea of its establishment remains the same which helps in maintaining its distinctiveness (Grimshaw, 2001). The back casting exercise provided an opportunity of reflecting on the short history of Facilities Management, charting its development and evolution. At the European Facilities Management Conference in Manchester (EFMC08) the vision of a new wave of Facilities Management was proposed in response to the context of post-industrial cities. A leading role for FM in urban sustainability was envisaged, with an emphasis on innovation and creativity, community based planning and open sourcing (EFMC, 2008). 1970s 1G Managed services, outsourcing Operational total facilities management, CAFM 1980s 2G Quality management, management agency Tactical benchmarking, FM processes, FIMS 1990s 3G Partnering, re-engineering processes, Strategic knowledge management, product innovation, sustainable facilities management 2000s 4G Business processes, open innovation, usability, Transformational service excellence, transformational outsourcing, As Facilities Management enters a fifth decade and, perhaps a fifth generation in the development of Facilities Management, what will the next generation be like? (EFMC, 2008). 2.10.1 Facilities management outsourcing trend in the world Europe is now the worlds biggest market for outsourcing. In 2004, Europe accounted for 49%

Scott Miracle Grow Speader; Make or Buy

Scott’s Miracle-Gro has a plant in Temecula, CA that produces seed spreaders. Management is deciding if it should keep the Temecula plant open or if it should outsource manufacturing either to mainland China or offshore China. Before Miracle-Gro became Scott’s Miracle-Gro, they outsourced to contract manufacturers for production. Scotts manufactured their spreaders since it acquired Republic Tool and Manufacturing. Scott’s Miracle-Gro manufacturing facilities have a plant in Temecula, CA. The Temecula plant improved productivity, efficiencies, and also different innovations including a new assembly process for their hand spreader.Also, they invented an in-mold labeling process that produced a label that did not fade, scratch, or peel off. Despite what the Temecula plant had done, management was looking to see if they could save money by outsourcing the full operation. The plant manager wanted to keep the Temecula plant open and felt that if the production was mov ed to China that there would be quality problems along with high shipping costs, and extra administrative costs could erase any economic benefit from outsourcing to China. Another alternative to outsourcing to China was building a Scotts-owned facility plant in China.This option would help keep the proprietary processes in the hands of Scott’s Miracle-G ro. However, the disadvantages associated with moving to China stated above (poorer quality, high shipping costs), would still be a negative. The problem is what should Scott’s Miracle-Gro do. We did a NPV analysis focusing on the 4 Cost drivers for the Temecula plants which are raw materials, labor costs, electricity costs, and overhead costs and compared them to what it would cost in China. The NPV for the Temecula plant is $94,826,678 (screenshot of spreadsheet in appendix).The NPV for China mainland (offshore NPV would be close to mainland China except for initial start-up costs, etc.. ) is $90,070,804 (screenshot o f spreadsheet in appendix). We analyzed the data by using the numbers provided in the case. For example, for analyzing the Temecula plant, we used the information in Exhibit 4. However, some of the data (number of employees in China) we based the information on what the Temecula plant was using. Based just on the NPV, it seems that closing the Temecula plant and moving to China would be the best option.However, important the potential cost savings (in labor and energy costs) might be, it is also necessary to look at other factors. Some of the other factors would include the production quality, control over their own products, proprietary rights, longer lead times, having to carry safety stock, and their image to stakeholders and employees. Also, management needs to look at problems that might arise if China’s government changes laws, problems in cases of ports closing, and the training and productivity of new employees. Next, we will analyze the 4 cost drivers more in depth.C ost Drivers There were four main cost drivers examined in this case: Raw Materials, Labor, Electricity (Energy), and Overhead. Scott’s must evaluate these cost drivers to determine whether outsourcing the manufacturing of their spreader will improve the company’s profitability and/or operational efficiency. Although, in some instances the decision to outsource can be very clear based on the numbers alone, there are also other not so quantitative risks such as loss of control, loss of inventory flexibility, and loss of one’s competitive advantage. Raw MaterialsPlastic resin is the main component in the manufacturing of the spreader bucket, and the costs are comparable whether it’s purchased in China or in the US. However, the Temecula plant did invest in a re-grind process which saves them an additional $100,000 per year. However, this savings has little impact on the overall operating expenses at the Temecula plant. Labor Costs Labor rates are one of the main driving forces in whether or not a company should make or buy a product or service. For s Scotts labor costs associated with manufacturing the spreader in the US is initially $6M vs. 350K in China, see attached appendix , which is 17X more costly to produce the spreader at the Temecula plant. Even if the plant can improve their operational efficiency in the out years and reduce labor costs it would still be difficult to compete with China during this 10 year period. Electricity (Energy) Costs Energy costs are still cheaper in China, by more than half the cost. However, the majority of energy which China uses is from coal plants and not environmentally friendly, more and more companies and US consumers are becoming sensitive to the issue of reducing one’s carbon footprint.Outsourcing based on energy costs is typically not the sole driver. However, if energy cost between China and the US become more competitive, such as in the case of the US using natural gas (i. e. fracki ng) to supply electricity to their plants the argument to bring manufacturing back to the US may become more compelling. Overhead The cost of overhead or Governance at the Temecula Plant is approximately $5M annually vs. China $500K (excluding $1M in year one for start-up costs) these are costs associated with Scott’s management to monitor, track and visit China to oversee operations. Sensitivity AnalysisDue to the uncertainty in the future economic trends, there are three uncertain factors playing important roles in the decision making. They are labor cost in China, electricity price in China and exchange rate between Yuan and Dollars. The NPV model is sensitive to the how those three factors change over the next decade. A careful analysis on the sensitivity is necessary in order to make sound business decisions. 1. Labor Cost According to the case we know that labor costs in china may have a big increase in the next 10 years, from 40% totally to 10% annual increase to even 40% annual increase.If the labor cost will increase 40% in the next 10 years, that means it’ll increase 3. 4% annually, so the NPV of costs will be $73,751,039. If the labor cost will increase 10% annually in the next 10 years, the NPV of costs will be $74,998,037. If the labor cost will increase 40% annually in the next 10 years, the NPV of costs will be $91,424,835. We can see from previous analysis, NPV of Temecula is $94,826,678. So if labor cost will increase differently, we’ll get different NVP. But no matter how big increase it’ll be, our decision will still be outsourcing to china. 2. Electricity Price The current electricity cost in China is 0. 65USD per kilo-watt hour. It is estimated to increase by 20% over the next 10 years. Assuming the electricity cost increase at a certain rate each year, we get the annual increase rate 1. 8% (1. 8% =(1+20%)^(1/10)-1). This estimated rate is probably lower than the actually annual increase because of increasing pr essure on environmental records and fuel costs. Thus how much does electricity cost may increase is important and the NPV model output is sensitive to it. However, since the electricity cost in China is so low when converted into USDs, the growth rate doesn’t influence the NPV that much.For example, experimenting with 5% annual growth, since 5% is significantly larger than 1. 8%, we get NPV = 74,968,548 USDs, whereas 74,376,968 USDs with 1. 8% annual growth. The difference would be 591,580 USDs, which isn’t that significant when putting it in a bigger scope. Also, 5% is an unlikely assumption given the fact that the Chinese is heavily investing in infrastructure to generate more energy. Thus, we think NPV model is not very sensitive to the electricity price. 3. Exchange Rate According to the case, we know that the market expectation was the yuan would appreciate by 20% in next five years.Since this datum is just an expectation, which means it is inaccurate and uncertai n, so that we need to analyze the sensitivity of it. We assume that the annual increase in value of Yuan is 3. 6%, we can get the NPV of costs is $74,376,968. However, if we decrease the rate, say 2%, the NPV of costs turns to be $69,099,021, which means the cost decreases; on the other hand, if we change the rate to 6%, the NPV of costs increases to $81,500,203. So we can conclude that the lower the annual increase in value of Yuan, the lower the NPV of costs. ConclusionAs we stated in the beginning we feel Scotts Miracle Gro should outsource the manufacturing of their to spreaders to China, this is based on the data and sensitivity analysis the group conducted. In addition, one of the questions that we had to examine was whether or not the technology to have â€Å"in-mold labeling† was a competitive advantage, and should it be a considered a core capability. Although, Scotts Miracle Gro manufactures spreaders, the brand name is about the quality of seed and fertilizers for the do-it-yourself lawn and garden consumer, and not the spreader.The consumers primarily purchases those products which enhance the look of the garden and lawn, selling spreaders which can disburse their product is ancillary, Scotts wants consumers to buy their seed and fertilizers every season (repeat customer) where as the purchase of a spreader is a one-time purchase every 10 years or more. Therefore, if Scotts can outsource the production of approximately 3 million spreaders to China at a significant cost savings then the company should do so. Cost savings realized should be re-invested into research and development so Scott’s can maintain their competitive edge is this home and garden market.

Is Abortion Right or Wrong - 1028 Words

In the United States, the process of having an abortion has been a controversial topic for many years. Even though an abortion is legal, Americans believe abortions are only morally correct when used for medical reasons. The word â€Å"abortion† can be defined various ways depending on a person’s perspective. Abortion is defined by Oxford as â€Å"the act of giving untimely birth to offspring, premature delivery, miscarriage; the procuring of premature delivery so as to destroy offspring† (Dionisio). The National Abortion Federation defines it as â€Å"a medical abortion is one that is brought about by taking medications that will end a pregnancy, which ends a pregnancy by emptying the uterus (or womb) with special instruments† (Dionisio). Another†¦show more content†¦In comparison, Pro-life has a number of faith groups, also: the Catholic Church, Eastern Orthodox Church, National Association of Evangelicals, Christian Coalition of America, and th e Church of Jesus Christ of Latter-Day Saints (Should Abortion Be Legal). In 2008, a poll was conducted to confirm that 54% of regular religious service attendees believe that abortion should be legal in all or most cases (Smith, Gregory). Reminiscent to any other state of affair, legal abortions have a few cons. First, innocent lives are taken away. Second, the Bible’s sixth commandment states that â€Å"Thou shalt not kill†. Third, abortion is not meant for contraceptives. Finally, it can cause psychological damage to the woman who has the procedure (Should Abortion Be Legal). In assessment to the cons, abortion also has pros. The first pro is women’s rights. Women should have the right to do whatever they please to their own self. Second, 68,000 women die each year in 33 countries from â€Å"back-alley† abortions. Death and injury from illegal circumstances decreases with legal abortion. Third, women have the decision to not birth children with rigorou s or life-threatening medical conditions (Should Abortion Be Legal). A child should not have to go through a lifetime of pain. Fourth, giving up aShow MoreRelatedAbortion Is Wrong Or Right1575 Words   |  7 Pagesbeen an ongoing debate whether abortion is wrong or right. More specifically, the issue breaks down between an ethical and legal issue. Some pro-life people argue that an abortion is morally wrong and should be illegal. Others that are pro-choice argue that an abortion is a legal and bodily right. Whether an abortion is wrong or right, each side supports different arguments. Pro-life argues that abortions are immoral for many reasons despite a woman’s bodily rights and among them is the strongestRead MoreIs Abortion Right Or Wrong?924 Words   |  4 PagesCoombs Kendra Gallos English 3 Online December 8, 2014 Is Abortion Right or Wrong? Abortion, do you think it is right or wrong? When you hear the word abortion what do you think of? People, who think abortion is right, think it is right for many different reasons. Such as they believe that it is the woman’s body and feel as if they should be able to do whatever they want to with their body. Other people, people who think abortion is wrong feel as if it is murder, that if they do not want a childRead MoreIs Abortion Wrong or Right?988 Words   |  4 PagesENG 112-01   September 2, 2015   Is Abortion Wrong or  Right?   Abortion is defined as â€Å"The removal of an embryo or fetus from the uterus in order to end the pregnancy† (dictionary.com). However, if only the debate over the abortion issue was as easy as the definition listed above. However, similar to most things in life, a statement or opinion is never right nor wrong, but simply left open for clarification. Those who are against abortion believe that abortion is the murder of innocent human beingsRead MoreIs Abortion Right Or Wrong?953 Words   |  4 PagesThroughout time there is always going to be controversy whether abortion is right or wrong. Some people look at abortion as killing an innocent baby but I believe it is not doing any harm being that it is not developed and every situation is different. Abortion is not only for people who do not want to care or cannot care for a child and all points must be understood before making the decision. There are some things in life that are hard to comprehend and this topic is a major e vent in life thatRead MoreAbortion : Right Or Wrong?985 Words   |  4 PagesAbortion: Right or Wrong? The famous writer Larry Barretto said, Babies are bits of stardust blown from the hand of God.† Abortion takes away a baby’s life, which begins at conception. A fetus’s heart begins to beat in just the first few weeks of the pregnancy. Women can have an abortion up to 9 weeks into the pregnancy. At nine weeks, the infant can make a fist, and the head is almost half the size of the entire body. The baby begins to have buds for baby teeth to appear. Some women still haveRead MoreIs Abortion Right Or Wrong?1116 Words   |  5 PagesIs abortion right or wrong? This is a big topic in today’s society. Abortion is always brought up whether it’s religion, politics, or just in a regular conversation. Although, the question remains; is it right or is it wrong? There are many arguments about it. There are an abundant amount of people that argue with each other over this topic. These, however, are opinion-based arguments. There are many points and articles a gainst abortion. There is also information about options for women who regretRead MoreAbortion : Is It Right Or Wrong?1924 Words   |  8 Pagesyears, abortion has become a live topic both at national and international levels, attracting great academic, legislative and judicial comments. Abortion is in many jurisdictions, a crime; though the sanctions for its violation differ. Its incidence in the world is increasing rather than decreasing. When it comes down to abortion the major question comes up, is it right or wrong to kill the unborn fetus? I agree in some cases but I strongly disagree with the idea. By the 1900’s abortions were outlawedRead More abortion: right or wrong? Essay746 Words   |  3 Pageson weather abortion is right or wrong. It often becomes a controversy. One way of arguing it is with Kerby Anderson’s â€Å"A Biblical View of Abortion.† Another is with Richard J. Hardy’s â€Å"The Right to Choose.† And lastly is Rachel’s, an anonymous writer from msngroups.com, â€Å"Abortion the Murder of Innocence.† Each of theses controversial articles are to objectively present different view or perspectives of abortion. nbsp;nbsp;nbsp;nbsp;nbsp;Kerby Anderson’s â€Å"A Biblical View of Abortion,† shows theRead MoreIs Abortion Morally Right or Wrong907 Words   |  4 PagesIs Abortion Morally Right or Wrong Kirstyn Fletcher PHI 103 Informal Logic Anthony Biduck October 26, 2011 What About it is Considered Moral or Unmoral? This subject is probably one of the top five most controversial subjects in the world today. Is it immoral to kill an unborn child? Do we have the right to choose what grows in our bodies before it becomes a citizen in America? Will God punish you for killing a person? So many questions go into this type of situation of what’s morally rightRead More Abortion - Right or Wrong? Essay1285 Words   |  6 PagesRight or Wrong? In January 2002 a college freshman, Karen Hubbard, bled to death after secretly delivering her baby in a bathroom stall at her dorm. Up until that night no one knew she was pregnant, not her family or her friends. Karen was a bright respected young girl, who had everything going for her. She was co-valedictorian at her school and was now on her way to college. In the fall of 2001 Karen went off to the University of Wisconsin, with high hopes from her parents. She was

Leadership Effectiveness Style and Ethics - 800 Words

Leadership Effectiveness: Style and Ethics Culture is a powerful force in organizations. Leaders must build and share a vision with followers which is ripe for the culture and current climate. Leaders must also recognize when an organization’s culture no longer supports the mission. Target Corporate Target is a corporate pillar in Minneapolis, Minnesota. Target’s mission is, â€Å"to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling our Expect More. Pay Less. ® brand promise† (Target, 2014b, para. 3). Target brands itself as the best company ever and declares itself fast, fun, and friendly (Target, 2014a). Target†¦show more content†¦Leadership Effectiveness A common measure for the success of a leader is leadership effectiveness. Leadership effectiveness is measured by multiple indicators including employee morale, organizational commitment, and job motivation (Jogulu Wood, 2006). Leadership effectiveness is a result of leadership style and ethics. Leadership Style Leadership style definitions have evolved from trait centric theories of a â€Å"Great Man† (Jogulu Wood, 2006) to today’s highly regarded transformational style (Limsila Ogunlana, 2008). Organizations have become employee oriented instead of production oriented, elevating employee performance to new heights (Limsila Ogunlana, 2008). Target is highly Team Member oriented, albeit to a fault which reduces its ability to deliver. Target values face-to-face meetings to ensure all stakeholders are on board before implementing. Meetings are challenging to schedule because of required attendee and room availability. Team Members are granted unlimited sick and volunteer time away, not to mention they are expected to meet with their network regularly. Execution halts while Team Members wait to meet. Ethical Leaders Focus on ethical leadership has increased with the fall of companies such as Target, Enron, and Tyco. Ethical leadership examines the heart of leadership, comparing leader professional morals and style with the organization’s mission (Palmer, 2009). When leadership actions are inShow MoreRelatedThe Leader s Ethical Values Influence Leadership Style Essay1658 Words   |  7 Pagesamaze you if you discovered that ethics and leadership style are correlated? The leaders come from various industries for instance, public, private, government, and non-profit/for-profit. The leader’s ethical values influence leadership style. The research suggests that the transformational leadership style is established on deontological ethics whereas transactional leadership is based on teleological ethics. Leader values and transformational/ transactional leadership suggest that a divergent setRead MoreEssay on Applied Business Research Case Study935 Words   |  4 Pagesthe world’s biggest corporations to failure, researchers and business leaders realize the need for ethical and sound leadership. The need for ethical and sound leadership helps to facilitate and manage daily operations and to sustain their competitive advantage within the global economy. However, with this evolution, numerous research studies add to the understanding of leadership theories and the effects on organizational climate and culture. The following findings concentrate on research limitationsRead MoreIndividual case study1382 Words   |  6 Pagesï » ¿1. How is ethical, authentic and morally based leadership demonstrated in the Pierian Centre case study? According to Grace (2006) defines ethical leadership is that ‘knowing your core values and having the courage to live them in all parts of your life in service of the common good.’ Ciulla suggests the three categories to ethical leadership: intentions, relational and the ends (Schedlitzki and Edwards 2014). Intentions are the ethics of leaders themselves (Schedlitzki and Edwards, 2014, p.221)Read MoreConcept Of An Advancing Leadership Style1660 Words   |  7 Pagesconcept of an Advancing Leadership Style. I will identify the characteristics of a leader, and the external and internal environments that would play a part in any leadership style. Additionally, I will demonstrate how this leadership model assists in moving the organization forward in the direction of the mission or goal and assist in defining the organizational culture. Finally, I will show how this model is useful to the leader and followers by comparing other leadership models and their effectsRead MoreThe Fundamental Roles Of Leadership And Organizational Change858 Words   |  4 PagesThe fundamental roles of leadership are to affect change and to enhance their follower decision and actions. According to Northouse (2013) leadership is defined as a process where an individual influence a group of individuals to achiev e a common goal (p.5). Within my organization, my leadership approaches are prevalent to the mission, vision, and goals for the Los Angeles County, Child Support Services Department. In particular, my leadership role consists of supporting and achieving consensusesRead MoreEthical Behavior Is Distinguishing And Performing One s Actions1490 Words   |  6 Pagesaccording to individuals, customs, morals and beliefs. Ethical behavior represents a value system that has been developed from a logical analysis of society, established by fairness, integrity, the desires and privileges of people and oneself. Ethical leadership encompasses two aspects. First, ethical leaders have to perform and make ethical judgments. Secondly, ethical leaders should direct fairly, through daily interactions with others, through the motivations of employees and team members, and throughRead MoreCharacter Analysis Of The Galileo Seven1720 Words   |  7 PagesSpock needs to take commands to achieve their mis sion. However, his strictly logical leadership style often conflicts with his crew, causing tension and resentment to arise. Therefore, this paper will examine the leadership style and behavior of Mr. Spock to measure its effectiveness as well as justify its suitability for such circumstance. According to Fiedler’s Contingency Model (1978), ‘effective leadership is contingent on, or depends on, the characteristics of the leader and of the situation’Read MoreDisney Pixar s Up Released922 Words   |  4 Pagesinto great adventure where ethics, purpose, and conflict will be put to the test and battle for priority in the leadership styles of many dominating characters of this plot. The way that leadership is best exemplified in this fil, and worded perfectly by Exploring Leadership, â€Å"Leadership has to do with relationships, the role of which cannot be overstated† (Komives, Lucas, McMahon, 1998). This quote is the embodiment of leadership that is exhibited in this film. Leadership can be found in nearly everyRead MoreWhat Makes A Good Leader?905 Words   |  4 Pagestruly effective) one is when they display authentic leadership. I will discuss two specific methods that characterized my manager’s display of authenticity in his leadership style as an accounting manager: ethics and trust, and other-centeredness (described by Robbins and Judge as, â€Å"socialized charismatic leadership†) (2011). Authentic Leadership through Ethics and Trust What role do ethics and trust play when we determine the effectiveness of a leader? Robbins and Judge point out that thereRead MoreThe Contingency Approach : Strategic Leadership And The Implications Of The Main Contingency Models On Different Management1069 Words   |  5 PagesIntroduction The contingency approach to leadership is the need for the leaders to be formable in their superior choice of leadership styles based on their situation thus if the leaders first attempt is to influence the group is failed ,the next suggested action will be to adopt a different style of leadership which is more compatible with the situation. Current theories and models of leadership explain the influence of position upon the satisfaction and performance of employees. While dissenting