Advantages and Disadvantages of In-House Manufacturing and Outsourcing

Running head: INTERNATIONAL BUSINESS
International business
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1INTERNATIONAL BUSINESS
Introduction
Outsourcing is one of the most popular and emerging concepts being followed by
the contemporary business entities in the recent time. It refers to the process of
contracting with the third party vendors for transferring the partial manufacturing
process in less cost. There are number of advantages as well as challenges can be
faced by the initiation of the outsourcing process and thus it should be initiated based
on different factor considerations. Outsourcing is majorly being followed in the service
sector but recently there are number of manufacturing companies are also initiating the
same strategy (Kazmer 2014). However, it should also be noted that outsourcing
process should be initiated based on the respective organizational situations and
different variable factors. This is due to the reason that there are number of instances of
getting success as well as failure from the initiation of the outsourcing strategy.
This paper will discuss about the advantages as well as disadvantages that will
be faced by outsourcing the manufacturing process or by manufacturing in-house.
Various real world examples will be used to further illustrate the concepts. In addition,
based on the limitations to be identified, a recommended plan will be discussed, which
will help to have minimal issues from initiating outsourcing strategy.
Advantages and disadvantages of manufacturing in-house
One of the major advantages that can be gained by manufacturing in-house is
having the total control over the manufacturing process. This is due to the fact that the
current business scenario is quite challenging as well as fluctuating and it is important
for the manufacturing process to be flexible enough to cope up with the changes. If the
manufacturing process is being initiated in-house, then the particular company will have
the full control over the process and they can change or regulate the process according
to their needs (Dora et al. 2013). Thus, the manufacturing process will more agile
against the fluctuating contemporary business factors. Another advantage that can be
gained from the initiation of the in-house manufacturing process is the less risk involved
in managing the privacy of innovation. This is due to the reason that in the case of new
innovation in the organization, manufacturing in-house will ensure that they are not

2INTERNATIONAL BUSINESS
getting out to any third parties. Thus, the competitive advantages can be well
maintained. Another major advantage that can be gained by the manufacturing in-house
is customization option. This is due to the reason that companies, which are more
concentrated towards providing customization option, are having the need for in-house
flexibility. The diverse needs that should be considered in the customization process
cannot be served by involving the third party vendors or it will become more time
consuming. For example, Tesla is having in-house development process for lithium ion
batteries, which are being used in their electric cars. The main advantage that is being
gained by them though their in-house development process is the privacy regarding
their innovation (Rajendran, Sinanoglu and Karri 2013). This is due to the fact that Tesla
is known for their innovation and high performance of their batteries. With the help of
their in-house manufacturing, these technologies are not got accessed by the others. In
addition, it should be noted that customers willing to buy Tesla cars are having the
options for customization in terms of colors, engine specifications and performances.
This is only being possible for the in-house development option for Tesla. They are
manufacturing the vehicles according to the individual specifications of the customers.
However, on the other hand, this should be noted that apart from the
advantages, there are numbers of disadvantages can also get emerged from the
initiation of in-house manufacturing process. One of the most important limitations of the
in-house manufacturing process is the cost involved. This is due to the fact that more
cost is involved in the case of in-house manufacturing process compared to the
outsourcing process. Initiation of the in-house development process will involve the
entire production process in the workplace along with the other elements required such
as the human resources, capital, infrastructure and legal formalities (Bey, Hauschid and
McAloone 2013). This will ultimately create complexities for the organization in terms of
cost and time involvement. The responsibility of the organization in having in-house
manufacturing process will also get increased. For instance, Tesla is facing issues in
meeting the market demand and they are not being able to cope up with the ever
increasing waiting period for their vehicles. This is mainly due to the reason that all the
resources of them are being invested in the production process and the involved