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

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Presentation on theme: "Team Economic Analysis: Make In-house vs Outsource (5-Year Plan) Organization, tech, summarizing: Chris Koszo Holly Miller Liliana Raigosa."— Presentation transcript:

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

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

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

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

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

8 Outsource Costs Base Bond prints (6,000 $1.20)-- Plot files Staples Sales Tax Shipping Per-Year ≈($7,600) ≈($360) ≈($420) ≈($587) ≈$880 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 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, Maintenance cost goes up ($450 default) Up to $ 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% Winner In-house Outsource In-house Outsource

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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