14 Aug two more
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Barry Callebaut is a Swiss chocolate manufacturing company. According to their website they are, “The world’s leading manufacturer of high-quality chocolate & cocoa products” (About Us, 2019, para 1). They state that at least 25% of the world’s chocolate products have Barry Callebaut chocolate in it. The company services everyone, from individuals to large corporations, making them a multifaceted food manufacturer. They sell their own product as well as provide chocolate to other food production companies. (About Us, 2019)
Barry Callebaut provides chocolate to other entities, which makes them a resource for other businesses to use for outsourcing. “Outsourcing refers to contracting an outside company to produce a product or perform a service” (Braun & Tietz, 2018, page 467). As an outsource resource, they are the makers and the other companies made the decision to buy rather than produce the chocolate themselves. This part of Barry Callebaut’s business provides a majority of their income, which is why they have progressed to their current level of outsource services. (About Us, 2019)
For Barry Callebaut, their revenue has increased over the years as they have expanded their customer base. Of course, to keep up with the increase in revenue their expenses have increased. This is especially true in the material expense category considering the increase in production to keep up with demand. Barry Callebaut has opened many facilities around the world and employ thousands of people, all in order to keep up with their growth. Facility, equipment, insurance and wage expenses must increase to accommodate their expansion. The increase in expenses has not had a negative effect on Barry Callebaut’s bottom line as they have been able to continue to grow and reinvest in their future. (About Us, 2019)
According to the New York Times, Barry Callebaut made an announcement regarding their growth in outsource volume on July, 11, 2019. “Sales volumes grew 5% to 1,589,181 tonnes in the nine-month period, an acceleration from 2.4% growth in the first half” (Koltrowitz, 2019, para 3). This is good news for Barry Callebaut. Providing so much outsource volume to other entities can be a risky venture but it looks as though they are doing well with it.
Barry Callebaut had to consider all of the possibilities when embarking on this endeavor. The two major considerations are what could happen to the quality of their product and if they could offer their product for a cost that is convincing to other entities. Barry Callebaut had to consider the potential for subpar product quality when the focus shifts to keeping up with the increase in demand, this would inevitably reduce their outsource volume. Their other major consideration is how to price their product in order to convince their potential customers to buy rather than make their own. This is a fine line that can also affect the quality of their product. If they are not careful they may end up sacrificing quality for a cheaper product.
Upon searching the New York Times, a couple from San Francisco Phillip Chigos and Mary Domenico are planning to open a children pajama business. They used their 2 bedroom apartment basement as their office area,in which they decided after choosing pattern and picking the fabrics to outsource their pajama business.
Phillip and Mary decided to outsource their children pajama business to a seamstress in China mostly because the low cost workers overseas. The would love to say “Made in USA” but they said “the cost of that would 4 to 10 times more” than planned and they didn’t want to sell their pajamas at over $120 each.
The couple mentioned that they will be able to sell their children pajamas for around $50 each and giving that they already identified their cost will be from 4 to 10 times less we can say that the cost for the pajamas are from $12.50 each to $5 each most likely depending on the volume purchased. With this information is safe to say that their revenue per piece will be from $37.5 to $45 without any shipping charges. Even if shipping charges double the cost per piece the couple will still generate a significant gross profit from 50% to 80%.
This gross profit will generate enough monies to cover the expenses of a low cost operation since they are doing everything from their basement and the business is Internet based. Some of the qualitative factors that they will face are customers, community and products, by choosing outsourcing the customers can be subject to shipment delays due to manufacturer being so far and delayed claim process if the product received is not as promised (Accounting tools, 2018). The community will be impacted by not generating employment at all or limited due to the outsourcing and as far as product, it is known that the outsourcing typically bring quality issues since the buyer almost never set foot on those manufacturing plants (New York Times, 2005).
It will be wise from the buyer to assume a higher percentage of loss/ damage products and evaluate how viable for their business outsourcing will be.
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