Outsourcing Labor

As a manufacturer of athletic shoes whose image is widely regarded as socially responsible, you find your costs increasing. Traditionally, your athletic shoes have been made in Indonesia and South Korea. Although the ease of doing business in those countries has been improving, wage rates have also been increasing. The labor-cost differential between your current suppliers and a contractor who will get the shoes made in China now exceeds $1 per pair. Your sales next year are projected to be 10 million pairs, and your analysis suggests that this cost differential is not offset by any other tangible costs; you face only the political risk and potential damage to your commitment to social responsibility. Thus, this $1 per pair savings should flow directly to your bottom line. There is no doubt that the Chinese government engages in censorship, remains repressive, and is a long way from a democracy. Moreover, you will have little or no control over working conditions, sexual harassment, and pollution.
1.) What do you do and on what basis do you make your decision? 2.) Write a comprehensive response (2-page paper) to the scenario described above. 3.) You must take a stance and present arguments to support your position. i.e. – Do you stay and lose money or do you move to China to make more money but hurt your reputation? Explain why you decided on one over the other. Use your operation management mindset.



Sample Solution