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Category > Business & Finance Posted 29 Jul 2017 My Price 8.00

Making outsourcing decisions Priscilla Nailey manages

Making outsourcing decisions Priscilla Nailey manages a fleet of 375 delivery trucks for Jones Corporation. Nailey must decide if the company should outsource the fleet management function. If she outsources to Fleet Management Services (FMS), FMS will be responsible for maintenance and scheduling activities. This alternative would require Nailey to lay off her five employees. However, her own job would be secure; she would be Jones’s liaison with FMS. If she continues to manage the fleet she will need fleet-management software that costs $8,250 a year to lease. FMS offers to manage this fleet for an annual fee of $285,000. Nailey performed the following analysis:

JONES CORPORATION

Outsourcing Decision Analysis

 

 

Retain 
In-House

Outsource 
to FMS

Difference

Annual leasing fee for software

$ 8,250

5           —

$     8,250

Annual maintenance of trucks

147,000

—

147,000

Total annual salaries of five other 
fleet management employees

175,000

—

175,000

Fleet Management Services" annual fee

—

285,000

(285,000)

Total cost 1 cost savings

$ 330,250

5  285,000

$   45,250

Requirements

1. Which alternative will maximize Jones’s short-term operating income?

2. What qualitative factors should Jones consider before making a final decision?

Answers

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Status NEW Posted 29 Jul 2017 02:07 PM My Price 8.00

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