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 transcript:

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

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

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

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

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

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

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)

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)

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

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

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)

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