How to answer these questions based on the text below: 

1. What are the characteristics of "vertically integration?" How does having a vertically integrated orientation affect the levels of various types of inventories? 

2. What possible reasons for Microfuse's high inventory levels other vertically integration may exist? How would these reasons be affected by increasing the level of outsourcing within Microfuse's operations? 

3. How does one define "limited outsourcing strategy" stated by Tom Cecil in the memo? Discuss the issue on both tactical and strategic levels. 

4. What kind of picture can be created by analyzing the description of Microfuse's global operations? How would the trend of relocating manufacturing functions to the Asia region influence Microfuse's operations? 

5. What is the difference between outsourcing and offshoring? What are the advantages and disadvantages of each in regard to Microfuse's case? As stated, Tom Cecil, VP of Microfuse's manufacturing division, asked Valerie (Val) Simmons, purchasing manager, to investigate the implementation of an outsourcing approach to solve a problem that had rapidly become the center of attention of the company's operating executives. Ms. Simmons would be working with Bob James, the plant superintendent. 

The problem was this: All of the major competitors have cut costs by outsourcing more than 40% of their manufacturing capabilities. In the past year, XFuse, Microfuse's closest competitor, has reduced their labor force by 50%. THE MICROFUSE INDUSTRY In order to truly understand the operational decisions Microfuse makes, it is necessary to be familiar with the industry. Microfuse is facing increased competition and significant pressures to remain innovative and efficient. The industry is technology-driven. Microfuse's primary industry is circuit protection. It is a highly competitive industry that attracts firms from around the world. The companies that survive in the industry must compete not only on quality and value-added functions, but also on price. This translates into a need to be innovative and competitive at the same time. There is always a threat of becoming viewed as a commodity product; thus the goal of many companies is to provide unique and valuable products that attract and retain customers. Obsolescence is the norm for the industry. COMPANY BACKGROUND Microfuse is the industry leader, offering the broadest line of circuit protection in the world. They offer 7 major circuit protection technologies (more than twice their nearest competitor) that span three industries: electronic, automotive, and electrical. (See above table) Micro fuse technology is a critical component in many of the products we use on a daily basis, from cell phones and digital cameras to nearly 90% of automobiles, industrial machinery, computers, and virtually any other devices using electrical energy. The diverse product line is coupled with a presence throughout the world. WEDNESDAY, APRIL 29 - NEW INFORMATION During the data collection phase of Val's research, she discovered that Micro fuse currently has on-site in central China and, through a recent acquisition, another facility located in southern China. Initially, the Chinese acquisition was driven by the fact that many more customers are setting up in China. For instance, the automotive sector in China alone is expected to increase from 4.4 million automobiles sold this past year to 10 million in 2010. Val was wondering how this new information would impact the outsourcing business case. The company also was projecting that almost all European functions may be moved to lower-cost sites in the near future. More specifically there appears to be an increased focus on moving the European division to Vietnam. Because of increased global business, Micro fuse expects that in the future, 70% of production will be done abroad. Domestically a reduction in operation is forecasted. According to Val's interviews with some of the operating executives, most of the forecasted shifts in manufacturing are contingent on many factors, but that is a possibility. There is a common belief that the Foundry sites in Champaign-Urbana, Illinois, will never be completely relocated due to the fact that are the base for planning and development and is heavily involved in the manufacturing function. Due to the control-orientated mentality of the company, moving all manufacturing away from headquarters seems unlikely, but not impossible. As Valerie has prepared the report for Tom Cecil, VP of Manufacturing, on an outsourcing/insourcing strategy

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1 Vertical integration or the ownership and control of various parts of the supply chain is a way of managing business processes to ensure that all aspects of production and distribution are handled b... View the full answer