Analyse the benefits to PV of outsourcing the manufacture of components for its shoes.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. Note to examiners: Disadvantages should not be rewarded; Benefits should relate to PV as a company, not e.g. to employees or other stakeholders
2. Answers could include:
3. Outsourcing is transferring functions or tasks to another organisation
4. PV could increase flexibility of operation and concentrate on the manufacture of shoes, achieving higher quality.
5. Lower operating costs might be achieved by drawing on specialists, enabling PV to shed higher cost elements of production and gain the economies of scale that specialists might have.
6. Lower inventory levels could be held.
7. Higher quality may result as specialists supply.
8. Savings from less capital needed.
9. Expertise from other businesses with more experience becomes available for PV to draw on.
10. Application
11. Ref to shoes / components only, without linking to other production point – 1 app mark as in stem of question
12. PV might outsource supplies of eyelets, laces, dyeing leather, packaging
13. Readily accessible network of component suppliers / efficient supply chain for shoe materials and components
14. Implications for shoe production, including mention of specifics, such as laces, leather
15. Reference to how outsourcing might help Pedro's high inventory problems and also 95% capacity utilisation
16. Might further outsourcing help with shoe defect problems?
17. Expertise from other businesses with more experience of the shoe market becomes available for PV to draw on.