Discuss the advantages and the disadvantages of using partti

Discuss the advantages and the disadvantages of using part-time workers, subcontracting work, and building up inventory as strategies for meeting demand.

Solution

Below are the advantages and disadvantages of the various strategies for meeting demand -

Part-time workers

Advantages -

1. Demand can be met by hiring part-time workers when required and firing them when not needed.

2. Avoids stockout costs by meeting demand

3. Labor cost savings as employee benefits etc. can be avoided for part-time workers

Disadvantages -

1. Hiring and firing costs

2. Difficulty in finding and recruiting the staff as and when required

3. Quality issues

Subcontracting work

Advantages -

1. Demand can be met by subcontracting work to other organizations

2. Firm can avoid capital costs and internal manufacturing costs

Disadvantages -

1. Subcontracting costs

2. Quality issues

3. Possible differences in the scope of work

Building up inventory by stocking

Advantages -

1. Demand can be met with the built up inventory thus avoiding stockout costs

2. Any unwarranted consequences which might spike up demand can be met through the built-up inventory

Disadvantages -

1. Inventory carrying costs

2. Possible damage to the products by stocking for long period of time