Sourcing Strategy Case Study Sample
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Nissan GTR and Lexus LFA Sourcing Strategy
This analysis will focus on the sourcing strategy applied by Nissan GTR; it will highlight and explicate how the company applies its sourcing strategy, comparing this strategy with the strategy applied by the Lexus LF-A’s and determining, which strategy is most favorable. On the other hand, the analysis will focus on providing alternative recommendations on how identified challenges that associated with Nissan GTR’s and Lexus LF-A’s sourcing strategy may be improved or prevented.
Nissan GTR applies an in-sourcing strategy; the concept of this strategy involves allocating or delegating certain jobs to people experts within the company rather than outside or external experts (www.youtube.com). In-sourcing is mostly applicable in scenarios where a company was not satisfied from the results of previous tasks that were allocated to an external expert. In the case of Nissan GTR, the manufacture of its engines is based on an in-sourcing strategy (www.youtube.com). The engine is designed and developed by a team of four craftsmen, known as the Takumi team. The company believes that the Takumi team is most qualified and highly experienced to handle development of Nissan GTR engines, as such, the company does not depend on external experts in the development of its engines (www.youtube.com). The team is also responsible for performing inspection of each completed engines; the inspection is meant to ensure that the final engines are of high and desired qualities. On the other hand, Lexus LFA applies a dual-outsourcing strategy; this strategy involves allocation of tasks to different external expertise (www.youtube.com). This may be performed on a global perspective where the company seeks the services on external consultants from other different regions and countries. In the manufacturing of Lexus LFA engines dual outsourcing has played a significant role in the design and creation of its engines. The outsourcing is performed on a global perspective; some of Lexus LFA engines are manufactured in Australia, Canada, and the United States as well as in Tokyo Japan (www.youtube.com). This is a dimension of dual-outsourcing; it entails delegating duties to different experts in different parts of the global.
Alternative Solution to Nissan GTR Sourcing Strategy and Lexus LFA
Apart from in-sourcing, Nissan GTR can also apply outsourcing i.e. dual outsourcing. Outsourcing involves allocation of organizational tasks and responsibilities to an external expert or consultant (Barrientos, 2014). This concept can also be applied in the context of Nissan GTR. On the other hand, Lexus LFA can apply single outsourcing strategies. Single outsourcing basically involves delegating duties to a single external expert or consultant (Barrientos, 2014).
Analysis of Outsourcing in Nissan GTR and Single-Outsourcing Lexus LFA
Outsourcing is associated with Expertise and Swiftness: When an organization outsources some of its activities to an external expert, its changes of completing most of its tasks in a timely manner increases. Additionally, external experts tend to possess certain knowledge, skills and tools that might not be possessed by its internal experts. This ensures that activities lead to high quality products and services.
Risk Sharing: For any organization that engages in design and provision of certain services, it is evident that it subject to experience certain risks of operations. As such, when it outsources some of its activities, chances are high that certain risks of operations are shifted toward the external vendor. Outsource vendors, being experts, play significant role in formulating strategies geared towards reduction of risks.
Concentration on core activities: Nissan GTR can also benefit from outsourcing as it creates a platform for the organization to concentrate on other core activities. This is basically as a result of the fact that it gives the organization more time. However, outsourcing has also been associated with certain challenges as discussed herein:
Increased Risk of Exposing Private/Confidential Data: Outsourcing certain services to external experts means that an organization is at a higher risk of exposing some of its private data to the external experts.
Hidden Costs of Operation: In as much as outsourcing is at times considered cost-effective, there are also certain hidden costs that have been associated with it i.e. the cost of hiring external experts that involves signing cross border contracts.
In the context Lexus LFA, single-outsourcing is associated with certain benefits such as:
Reduction of operational risks: Delegating duties to a single external expert reduces the scope of risks that a company may experience when it allocates tasks and duties to external experts.
Reduced Costs: To some extent, single out-sourcing may reduce risks associated with dual out-sourcing as it entails a reduction of the costs that may be required to hire two or more external consultants and experts.
High Quality Production: External experts usually engaged in single-outsourcing process create an opportunity for ideas and knowledge facilitating the production of high quality services. However, on their hand, single-outsourcing is also associated with certain challenges for instance:
Increased Operational Costs: Despite the fact that dual-outsourcing subjects a country to more operational costs compared to single-outsourcing, it is apparent that single-outsourcing is also associated with higher rates of operational costs compared to companies that focus on in-sourcing strategies.
Relatively Increased Risks: Compared to in-sourcing strategies, single-outsourcing subjects a company to increased operational for instance increased risk to undergo losses et cetera.
Actual Recommendation and Conclusion
In as much as Nissan GTR has experienced a high level of success over the last five years by focusing on in-sourcing as a means of designing and developing its engines, it should also focus on outsourcing as a means of enhancing quality. There are experts in engine development that I believe that could add value to the current Nissan GTR engines. Additionally, outsourcing can also ensure that the Takumi team share ideas with external experts hence improving their knowledge and skills.
In the case of Lexus LFA, dual-outsourcing seems to be the main sourcing strategy that has enabled the company to attract a significant number of clients on a global perspective. However, this sourcing strategy is associated with certain challenges as aforementioned. In this aspect, the company may engage in single outsourcing as a means of reducing challenges such as; high costs of operation, increased rates of risks among others.
Barrientos, S. (2014). Promise and Limits of Private Power: Promoting Labor Standards in a Global Economy by Richard M. Locke; Outsourcing Economics: Global Value Chains in Capitalist Development by William Milberg and Deborah Winkler, The.
National Geographic - Nissan GTR [Full Documentary] (720p). (n.d.). Retrieved from
National Geographic Megafactories Lexus LFA. (n.d.). Retrieved from https://www.youtube.com/watch?v=OlDzuM0bE7M
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