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Team Economic Analysis: Make In-house vs Outsource (5-Year Plan)

Team Economic Analysis: Make In-house vs Outsource (5-Year Plan). Organization, tech, summarizing: Chris Koszo Holly Miller Liliana Raigosa. Own an engineering firm…. Print engineering drawings in-house?. Outsource print jobs?. Problem. In-house. HP 4000-Series Plotter Considerations

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Team Economic Analysis: Make In-house vs Outsource (5-Year Plan)

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  1. Team Economic Analysis:Make In-house vs Outsource (5-Year Plan) Organization, tech, summarizing: Chris Koszo Holly Miller LilianaRaigosa

  2. Own an engineering firm… Print engineering drawings in-house? Outsource print jobs? Problem

  3. In-house • HP 4000-Series Plotter • Considerations • Have to purchase • Ink Costs • Operator costs • Salvage value • Space • Drawbacks • High initial cost • Operating costs • Maintenance • Floor space needed • Benefits • Fast turnaround time • Great quality control

  4. Outsource • To Mission Reprographics • Considerations • No initial cost (pay-as-you-go) • Have to proof • Need delivery • Our firm not self-reliant • Benefits • No initial cost • No printing hassles • No floor space needed • Drawbacks • Slower turnaround • Reliance on delivery • Questionable quality

  5. In-house • Purchase price • Supplies cost • Maintenance cost • Operating cost • Operator cost • Salvage value • Inflation Outsource • Base printing prices • Additional costs • Tax • Shipping • Inflation Basic costs we are comparing

  6. Basic Assumptions 5-Year timeframe for analysis 6,000 (24x36) pages printed annually In-house and outsource = same product Steady 3.00% inflation rate

  7. In-house Costs Per-Year =($3,329) ≈($450) ≈($5,400) ≈($620) ≈$3,000 • Buy plotter @ $12,000 (pay off in 5 years @ 12% interest)--------------------------- • Maintenance (cleaning & parts/Labor)--- • Supplies (Ink, Heads, Paper)---------------- • Operation (Manpower, Utilities)------------ • 5-Year Salvage Value--------------------------- Total 5-year Cost =($45,954)

  8. Outsource Costs Per-Year ≈($7,600) ≈($360) ≈($420) ≈($587) ≈$880 • Base Bond prints (6,000 prints @ $1.20)-- • Plot files---------------------------------------------- • Staples------------------------------------------------ • Sales Tax--------------------------------------------- • Shipping--------------------------------------------- Total 5-year Cost =($49,700)

  9. What’s the best deal? Clearly, in-house costs less per project length (5 years) $45,954 vs $49,700 Without sensitivity analysis, in-house is the better choice

  10. Sensitivity Analysis Winner In-house Outsource In-house Outsource Outsource • Varying interest rate (3.00% default) • Down to 2.50% OR up to 3.50%---------------------- • Supply cost goes up ($5,048 default) • Up to $6,000----------------------------------------------- • Maintenance cost goes up ($450 default) • Up to $600-------------------------------------------------- • Base printing and additional costs fall • Down $.20 per-page and $.15 per staple----------- • Plotter credit int. rate goes up (12% Default) • Up to 19%---------------------------------------------------

  11. Conclusion After doing sensitivity analysis, in-house is still a better choice. Outsourcing would most likely only become a better choice if print shops started charging around 15% less (perhaps due to recession becoming really bad)

  12. Resources Holly’s records, invoices etc. Mission Reprographics Plotter retailers (Internet, local shops) Job statistics & postings for “print machine operators”

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