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Outsourced Engineering Services

Medium
Construction
Profitability
Public View

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This case is an outsourcing case which requires the candidate to analyze the benefits and costs of outsourcing different business functions.

Your client is a large producer of construction equipment with worldwide sales (e.g., cranes, earth-moving equipment)

The client uses both internal and external engineers to do product design andengineering — activities include detailing, design, analysis and modeling related to the client’s end products You are called in to reduce the cost associated with outsourced Engineering Services

Question 1
• What would be your original hypotheses for the client to reduce the spend of outsourced Engineering Services?
• Which strategies can the client use to reduce his expense related to outsourced Engineering Services?
Question 2
• We found out that the client purchased Engineering Services from 60+ suppliers, of which 20 suppliers constituted 80% of the spend
• We decided to primarily explore leveraging engineering services providers in low-cost countries such as India and Eastern Europe, which we had deemed to be the most promising
• Let’s explore this offshoring opportunity a bit more in depth, One of the key reasons for moving work offshore is obviously costs due to lower wages. What could be other factors driving forces and obstacles for moving more work offshore?
Question 3
• After we have established what the key driving forces and obstacles are for moving more work offshore, let’s explore the cost and savings side
• In 2003, the client’s facilities purchased 500,000 hours of Engineering Services from third-party suppliers, 10% of which was done offshore
• What would be the total savings for moving all the work offshore?
• Follow-up question: are there any other cost factors you would consider?

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Published July 17, 2025 • 34 views
Firm/University: Kearney
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