Courtney Hilton posted Jul 4, 2018 1:08 PM
I conducted my location justification report on an expansion of Caterpillar to South Korea.
There is a lot of pressure in the construction industry to reduce costs and maximize resources
while simultaneously providing high-quality products. This is easier said than done, however,
as there is often a higher demand than supply in the industry. This is what makes offshoring
an appealing option. Outsourcing certainly poses advantages, including cost efficiency,
domain expertise and improved scalability (Construction, 2018). Having a manufacturing
plant in country does indeed reduce import and transportation costs. This is especially
amplified in an industry where the product is very large, and there is such an expansive
geographical distance between the two countries. While Caterpillar already has an advanced
supply chain system in place, including shipping equipment overseas, one are that I believe
could make sense to outsource is in on-site delivery and warehousing of products.
Nearly half of the South Korean population live in Seoul, which means that more than likely
this is where a majority of construction products will take place. Thus, it is important to have
a warehouse and port in a location that is central to where construction projects are
happening. I believe that one of the best areas for warehousing would be in Incheon, which is
just a short distance from Seoul, and home to the second largest sea port in the country.
With all pros comes cons, however. One such con is the effect that outsourcing will have on
company culture (Patel, 2017). This would be a key consideration for this move, as Caterpillar
often finds itself under heavy scrutiny forits bloodbath layoffs. The great thing about Incheon
and Seoul, aside from being geographically very close to each other, is that they are also two
dominant expatriate communities. To preserve American jobs, the hope would be that there
would be a delicate balance in finding U.S. citizens to relocate overseas, while also taking
advantage of local expertise.
Patel, D. (2017). The pros and cons of outsourcing. Forbes. Retrieved from
Outsourcing construction services. (2018). Source Fit. Retrieved
10-1 Discussion: Outsourcing
Pablo Kiger posted Jul 5, 2018 8:13 AM
In the expansion of Walmart´s produce department to South Korea, outsourcing happens to be
a key strategy by which an organization contracts out major functions to specialized and
efficient service providers, who ultimately become valued business partners.
Three are the main services I´d outsource
Application maintenance and development.
IT and networking.
Walmart will benefit greatly from having most of these services sourced from China, South
Korea, and India. Having a local customer service department or a department being led by
South Koreans as well as marketing service will help greatly on understanding customers needs,
trends, consumption patterns and local changing environments.
Potential risks are: (Swink, et al 2016 p. 339).
Supplier technical, operations, or quality problems.
Supplier financial problems.
Inadequate physical, information, and intellectual property security.
Disasters such as fires, earthquakes, hurricanes, and floods.
Changes in government regulations.
The concentration of suppliers within the same geographical region.
Benefits we are considering by outsourcing these key activities are:
To reduce the total cost
Enhanced quality of the products
Access to innovation and technology
Single source or dual source?
I would recommend starting doing dual source and then reduce it single source. The idea behind
it is to hire two preferred suppliers to provide the same product or service. After evaluation
(based on the RFT – request for tender – requirements, contracts, disclosure agreements,
intellectual property agreements) the company will move to a single-source of these services.
Request for Tender manager requires a shipper to be very clear on the proposed scope of the
partnership. From inbound to outbound, inventory management and value-added Services,
providers should make sure that all activities in the scope of the arrangement are documented
to a fine degree of detail.
Swink, M., Melnyk, S. A., Harley, J. L., & Cooper, M. B. (2016). Managing Operations
Across the Supply Chain (3rd ed.) New York, NY: McGraw Hill.
"Walmart: Operations Management 10 Decisions, Productivity." Panmore Institute.
Nathaniel Smithson, 26 Aug. 2015.
Retrieved from Web. 05/052018.
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