Outsourcing Decision in the Rondot Automotive Case

¶ … outsourcing decision in the Rondot Automotive case on pages 132-133 in the textbook. If you were in the position of Glenn Northcott, what would be your analysis of the opportunity to outsource painting for housings to Greven? What recommendations would you make to Terry Gibson and Dick Taylor and why?

In developing your answer, consider the following:

What reasons, other than financial factors, need to be taken into account in this decision?

As a company known for providing outstanding products, Rondot Automotive has a reputation it must uphold. When a company outsources any aspect of its operations, it loses a degree of oversight over the quality control of that component of the production process. Rondot cannot simply look at the bottom line in terms of money saved from outsourcing. It must also consider if the quality offered by the other company is the same and/or superior to the expected quality of the painting customers expect from Rondot. If it is inferior, Rondot must calculate how much this will negatively impact customer sales. However, in the case of Greven, the quality of the new painting technology does seem superior to Rondot's current offerings.

Using an outsourced contractor, even a superior one, also leaves the company vulnerable to the effects of market forces. If the company to which the work is outsourced experiences difficulties, Rondot may suffer due to circumstances beyond its control, and its customers may not be understanding.

Q2. Do you think Glenn should get prices from other suppliers? Why or why not?

However, even though outsourcing decisions should not be based purely on costs saved in a first analysis, it is a good idea to consider the possibility of outsourcing, if it is feasible, as it seems to be regarding the painting. Outsourcing less critical operations of the company (of which painting is one, given that it is an exterior, rather than an interior aspect of the product) frees up needed time, labor, and energy to devote to what makes the company truly great. Glenn should get prices from other suppliers to get a full picture of all of Rondot's options.

Q3. What do you want to do about the family of parts that did not pass the quality tests?

Before contracting with the Greven E-Coating Company, Rondot should demand a full explanation of why Greven's parts did not pass the quality tests. The technology that is being used is highly experiential in nature. On one hand, e-coating could truly be a cost and time savings. On the other hand, it might present technical complications so unwieldy that the theoretical costs and times savings could be nonexistent. Rondot should also explore other companies that offer similar and different high-tech painting services at a similar cost level, to see if their quality control results are better than or worse than that of Greven's painting.

Q4. Do you think that Rondot should outsource their painting operations completely and dispose of the equipment? Why or why not? Support your answer with analysis and/or published sources.

The e-coating seems to be superior both in terms of cost and quality, compared to what Rondot is currently manufacturing. That is, it is superior if it works consistently. First, Rondot should see if there are other painting companies that offer better or similar quality to Greven at similar or cheaper prices. Greven's technology is unique, but Rondot should calculate if the quality and speed it offers is comparable with other offerings on the market.