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Outsourcing of Typebound Packagings at VCC - A Viable Option?

The car industry is today characterised by low increase in demand and problems with over-capacity, and globalisation drives the companies to take various measures in order to remain competitive. Cost cutting, rationalisation and increased efficiency is greatly sought after in order to lower the ever increasing development costs as much as possible. One of the most common measures taken has been to focus more upon the company’s core competencies and cutting-edge activities by outsourcing functions that are viewed as being just peripheral or supportive for its operations. The result of this is that more and more activities and functions that were previously managed in-house, is now bought from external service providers. One of the areas that have been subject for outsourcing at VCC is the development and ownership of Typebound packagings – packaging devices that are uniquely constructed according to the components they are to carry into the Trim and Final Assembly Plant. We have been asked by Volvo to look at current packaging strategies and the possibility to outsource the development, responsibilities and ownership related to Typebound packagings. What is important is that VCC has to get something in return when deciding to outsource this. We have concluded that there are many more issues than just costs that have to be taken into account. Efficiency gains, partnership potentials, operational complexity, and last but not least future strategic fit are highly important aspects when considering entering a venture like this. The question is if this venture won’t just lead to higher cost in the long term, and also without actually generating any greater benefits to VCC.