Insourcing$/$Outsourcing: The FlexCon Piston Decision $($p$.$ #$846).$ Please answer all questions.

The pressure for cost reduction is severe and will continue to increase. Cost reduction pressures are forcing organizations to use their production resources more efficiently. A $2018$ Hackett Group Study found that enterprise cost reduction was one of the top three strategic priorities in $69\%$ of companies surveyed. As a result, executive management will increasingly rely on insourcing$/$outsourcing decisions as a way to manage costs.

Firms continue to become more specialized in product and process technology. Increased specialization implies focused investment in a process or technology, which contributes to greater cost differentials between firms.

Firms will increasingly focus on what they excel at while outsourcing areas of nonexpertise. Some organizations are formally defining their core competencies to help guide the insourcing$/$outsourcing effort. This affects decisions concerning what businesses the firm should focus on$.$

The need for responsiveness in the marketplace is increasingly affecting insourcing$/$outsourcing decisions. Shorter cycle times, for example, encourage greater outsourcing with less vertical integration. The time to develop a production capability or capacity may exceed the window available to enter a new market.

Wall Street recognizes and rewards firms with higher ROI$/$ROA$.$ Because insourcing usually requires an assumption of fixed assets $($and increased human capital$),$ financial pressures are causing managers to closely examine sourcing decisions. Avoidance of fixed costs and assets is motivating many firms to rely on supplier assets.

Improved computer simulation tools and forecasting software enable firms to perform insourcing$/$outsourcing comparisons with greater precision. These tools allow the user to perform sensitivity analysis $($what$-$if analysis$)$ that permits comparison of different sourcing possibilities.