United Technologies Inc. The Case Solution
Question no 2
During making any decision there are many things that one should take in account apart from checking the feasibility of both options in terms of cost. There could be many things that do not affect the business in the short run but it could affect in the long run. To make a final decision about what option the company chose, whether it go for assembling or for purchasing, there is a need of to do analysis on the opportunity cost of both the options.
If the company opt for assembling, there could be many problem associated to it. Like for doing assembling, storage facility is one of the main problem that arises during such type of operations because there is a need to acquire a very large space that is occupied by equipment used in assembling process. Then there is a need of technical supervision to check the day to day working of these equipment. Because if there occurs any issue that led the equipment to get stopped this will have a great impact on the regular production of the company and if that not handled timely the company would have to suffer losses. But in case of United Technologies Inc., as it was already engaged in assembling operations so there is no need to worry about previously mentioned problems, because they had already acquired storage for their assembling purposes and employed technical supervisors to keep a check on regular assembling related activities.
Now if the company opt for purchasing, the issues related to this option are supply and quality of the products. In case of supply there is always a possibility that the products could be not delivered at time because of any reason like climatic issues, traffic issues and what so on. In addition to this there could be problems arising in terms of quality of the products supplied. In both the cases there is a chance that the active customers would question the company. So it is better for the company to not take risk in terms of quality and supply of the products so the loyal customers remain always satisfied from the company. But the company could tackle these issues by providing the suppliers a minimum delivery time so that if there happen any chance of late delivery it would not affect the company to provide products to their customers on time. For issues related to the quality of products the company would have to keep strict terms with the supplier so that they do not compromise upon the quality of the products that they finally deliver. Also the company would have to hire an employee to ensure the quality of delivered products and if found any item with no quality, that would be returned back to the supplier. In purchasing there also is a problem related to stock holding, like the inventory held needed to be properly managed, it also needs to be counted regularly to avoid any inventory shrinkage. So the company would need to employ someone for the management of inventory held and regular inventory count.
The other factors that needs to be considered before taking any final decisions are as following:
- The assurance at which the provider would supply for the excess 7 years after the first is to be considered.
- The devaluation charge reserve funds on the new hardware (i.e., on $450,000) obtained isn't considered for the investigation of the present defense, rather only the expense of assembly and natural substances is considered.
- The cost that the provider is giving is for one year in particular, the possibilities of him expanding the expense of the component is not considered yet.
- The space that is accessible to store the stock is considered.
- Another most important significant component to be considered is the holding of inventory cost investigation before taking any final decision.....................
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