Kindly answer Question 2 from the given case study using the provided information of step 5 and following the info mentioned in table 7.7,7.8The following information can help in answering: Some of the qualitative criteria that a company might use to evaluateRequest for information (RFI)An inquiry to a potential sup- plier about that supplier’s prod- ucts or services for potential use in the business. The inquiry can provide certain business requirements or be of a more exploratory nature.Multicriteria decision modelsModels that allow decision makers to evaluate various alternatives across multiple decision criteria.suppliers include:9• Process and design capabilities. Since different manufacturing and service processes have inherent strengths and weaknesses (Chapter 3), the buying firm must be aware of these characteristics up front. When the buyer expects suppliers to perform compo- nent design and production, it should also assess the supplier’s design capability. One way to reduce the time required to develop new products is to use qualified suppliers who are able to perform product design activities.• Management capability. Different aspects of management capability include man- agement’s commitment to continuous process and quality improvement, overall professional ability and experience, ability to maintain positive relationships with the workforce, and willingness to develop a closer working relationship with the buyer.• Financial condition and cost structure. Selecting a supplier that is in poor financial condition presents a number of risks. First, there is the risk that the organization will go out of business, disrupting the flow of goods or services. Second, suppliers who are in poor financial condition may not have the resources to invest in required personnel, equipment, or improvement efforts.• Longer-termrelationshippotential.Insomecases,abuyingfirmmaybelookingto develop a long-term relationship with a potential supplier. Perhaps the supplier has a pro- prietary technology or foreign market presence that the sourcing firm wants to tap into. Step 5: Conduct Supplier SelectionThe objective of the supplier selection step is to identify a short list of suppliers with whom thebuying firm will engage in competitive bidding or negotiations. Multicriteria decision mod-els, as the name suggests, are models that allow decision makers to evaluate various alternativesacross multiple decision criteria. Multicriteria decision models are especially helpful when thereis a mix of quantitative and qualitative decision criteria, when there are numerous decision alter-natives to be considered, and when there is no clear "best" choice. They are therefore well suitedto supplier selection efforts. Multicriteria decision models can help formalize what would other-wise be an ill-structured, poorly understood process.The Weighted-Point Evaluation System. A common multicriteria decision model is theweighted-point evaluation system. In this model, the user is asked up front to assign weights to theperformance measures (Wy), and rate the performance of each supplier with regard to each dimen-sion (Performancexy). The total score for each supplier is then calculated as follows:ScorexPerformancexy X Wywhere:Ibid.10..TABLE 7.7Advantages andDisadvantages ofInsourcing andOutsourcingX = Supplier XY = performance dimension YPerfomance xy = rated performance of Supplier X with regard to performance dimension YWy assigned weight for performance dimension Y, where Wy = 111Y=1TABLE 7.8Factors That Affectthe Decision toInsource orOutsourceY=1ADVANTAGESHigh degree of controlAbility to oversee the entire processEconomies of scale and/or scopeADVANTAGESHigh strategic flexibilityLow investment riskImproved cash flowAccess to state-of-the-artproducts and servicesLAInsourcingDISADVANTAGESCHAPTER 7. SUPPLY MANAGEMENT 201Reduced strategic flexibilityRequired high investmentPotential suppliers may offer superior products and servicesOutsourcingDISADVANTAGESEnvironmental uncertaintyCompetition in the supplier marketAbility to monitor supplier'sperformanceRelationship of product/service tobuying firm's core competenciesPossibility of choosing a bad supplierLoss of control over the process and core technologiesCommunication/coordination challengesIncreased risk of supply chain disruptionCustomer social responsibility (CSR) risksFAVORSFAVORSINSOURCING OUTSOURCING(7.3)LowLowLowHighHighHighHighLow CASE STUDYPagoda.comIntroductionPagoda.com is an Internet service provider (ISP) that caters toindividual consumers and small businesses who require a highlevel of service and are willing to pay a premium for it. Spe-cifically, Pagoda.com offers state-of-the-art email applicationsand Web-building software, as well as plenty of storage spaceand the fastest access available. The marketing vice president,Jerry Hunter, puts it this way: "There are a lot of companies outthere promising the cheapest Internet access. But what do youget for your money? Slow- or no-access and an endless streamof system crashes. And I won't even mention the lack of sup-port if you have a technical question! For a few dollars more amonth, we give our customers the environment they need tobe productive. It's no surprise, then, that we have the highestcustomer satisfaction and retention rates in the industry."The Online Help DeskOne of Pagoda's services is its online help desk. The onlinehelp desk works as follows: Customers who are experiencingtechnical problems, or who simply have questions about theiraccount, enter a one-on-one chat room, where they can interactdirectly with an expert. Problems are usually resolved within 10minutes, and customers have listed it as one of the top three rea-sons they stick with Pagoda.com. Presently, Pagoda has enoughcapacity to handle up to 900,000 requests per year, althoughmanagement doesn't expect the number of requests to changemuch from the current level of 800,000 per year.A firm located in New Delhi, India, has approachedPagoda about outsourcing the online help desk. The offer isattractive. The New Delhi firm's own personnel would handlethe help desk function. These personnel all speak English flu-ently and have college degrees or appropriate technical back-grounds. And because they are located in India, labor costswould be a fraction of what they are in the United States. Thesavings would be passed on, in part, to Pagoda. And since the220 PART III ESTABLISHING SUPPLY CHAIN LINKAGES4. A statement of work typically specifies performancemeasurements that the buying firm can use to determinewhether the service provider is meeting the terms of thehelp desk chat room exists on the Internet, Pagoda's customersshould be unaware of the switch.Pagoda management has put together the following fig-ures, outlining the yearly costs associated with the current sys-tem and the Indian proposal:Current Online Help DeskPersonnel costs:40 full-time-equivalent (FTE) technical experts @ $40,000per year (salary and benefits); 3 supervisors @ $70,000each per year (salary and benefits)Equipment costs:4 servers @ $2,000 per year20 PCs@ $1,000 per yearVariable costs:$1.50 per request (office supplies, fax paper, etc.)New Delhi ProposalFixed cost:$1,500,000 per contract year (to cover administrative andIT costs)Charge:$0.50 per requestQuestions1. Calculate the total cost of outsourcing the online helpdesk versus staying with the current solution. Whichoption is cheaper?2. What other factors, other than costs, should Pagoda con-sider? How would you weight these factors? Given theabove, how might you use a weighted-point evaluationsystem to evaluate the two options?3. Should Pagoda.com outsource its online help desk? Whyor why not? Be sure to consider Table 7.7 and 7.8 whenframing your answer.contract. What performance measurements would yourecommend be put in place? What should happen if theservice provider fails to meet these requirements?

Question

Kindly answer Question 2 from the given case study using the provided information of step 5 and following the info  mentioned in table 7.7,7.8The following information can help in answering: Some of the qualitative criteria that a company might use to evaluateRequest for information (RFI)An inquiry to a potential sup- plier about that supplier’s prod- ucts or services for potential use in the business. The inquiry can provide certain business requirements or be of a more exploratory nature.Multicriteria decision modelsModels that allow decision makers to evaluate various alternatives across multiple decision criteria.suppliers include:9• Process and design capabilities. Since different manufacturing and service processes have inherent strengths and weaknesses (Chapter 3), the buying firm must be aware of these characteristics up front. When the buyer expects suppliers to perform compo- nent design and production, it should also assess the supplier’s design capability. One way to reduce the time required to develop new products is to use qualified suppliers who are able to perform product design activities.• Management capability. Different aspects of management capability include man- agement’s commitment to continuous process and quality improvement, overall professional ability and experience, ability to maintain positive relationships with the workforce, and willingness to develop a closer working relationship with the buyer.• Financial condition and cost structure. Selecting a supplier that is in poor financial condition presents a number of risks. First, there is the risk that the organization will go out of business, disrupting the flow of goods or services. Second, suppliers who are in poor financial condition may not have the resources to invest in required personnel, equipment, or improvement efforts.• Longer-termrelationshippotential.Insomecases,abuyingfirmmaybelookingto develop a long-term relationship with a potential supplier. Perhaps the supplier has a pro- prietary technology or foreign market presence that the sourcing firm wants to tap into. Step 5: Conduct Supplier SelectionThe objective of the supplier selection step is to identify a short list of suppliers with whom thebuying firm will engage in competitive bidding or negotiations. Multicriteria decision mod-els, as the name suggests, are models that allow decision makers to evaluate various alternativesacross multiple decision criteria. Multicriteria decision models are especially helpful when thereis a mix of quantitative and qualitative decision criteria, when there are numerous decision alter-natives to be considered, and when there is no clear &#34;best&#34; choice. They are therefore well suitedto supplier selection efforts. Multicriteria decision models can help formalize what would other-wise be an ill-structured, poorly understood process.The Weighted-Point Evaluation System. A common multicriteria decision model is theweighted-point evaluation system. In this model, the user is asked up front to assign weights to theperformance measures (Wy), and rate the performance of each supplier with regard to each dimen-sion (Performancexy). The total score for each supplier is then calculated as follows:ScorexPerformancexy X Wywhere:Ibid.10..TABLE 7.7Advantages andDisadvantages ofInsourcing andOutsourcingX = Supplier XY = performance dimension YPerfomance xy = rated performance of Supplier X with regard to performance dimension YWy assigned weight for performance dimension Y, where Wy = 111Y=1TABLE 7.8Factors That Affectthe Decision toInsource orOutsourceY=1ADVANTAGESHigh degree of controlAbility to oversee the entire processEconomies of scale and/or scopeADVANTAGESHigh strategic flexibilityLow investment riskImproved cash flowAccess to state-of-the-artproducts and servicesLAInsourcingDISADVANTAGESCHAPTER 7. SUPPLY MANAGEMENT 201Reduced strategic flexibilityRequired high investmentPotential suppliers may offer superior products and servicesOutsourcingDISADVANTAGESEnvironmental uncertaintyCompetition in the supplier marketAbility to monitor supplier'sperformanceRelationship of product/service tobuying firm's core competenciesPossibility of choosing a bad supplierLoss of control over the process and core technologiesCommunication/coordination challengesIncreased risk of supply chain disruptionCustomer social responsibility (CSR) risksFAVORSFAVORSINSOURCING OUTSOURCING(7.3)LowLowLowHighHighHighHighLow CASE STUDYPagoda.comIntroductionPagoda.com is an Internet service provider (ISP) that caters toindividual consumers and small businesses who require a highlevel of service and are willing to pay a premium for it. Spe-cifically, Pagoda.com offers state-of-the-art email applicationsand Web-building software, as well as plenty of storage spaceand the fastest access available. The marketing vice president,Jerry Hunter, puts it this way: &#34;There are a lot of companies outthere promising the cheapest Internet access. But what do youget for your money? Slow- or no-access and an endless streamof system crashes. And I won't even mention the lack of sup-port if you have a technical question! For a few dollars more amonth, we give our customers the environment they need tobe productive. It's no surprise, then, that we have the highestcustomer satisfaction and retention rates in the industry.&#34;The Online Help DeskOne of Pagoda's services is its online help desk. The onlinehelp desk works as follows: Customers who are experiencingtechnical problems, or who simply have questions about theiraccount, enter a one-on-one chat room, where they can interactdirectly with an expert. Problems are usually resolved within 10minutes, and customers have listed it as one of the top three rea-sons they stick with Pagoda.com. Presently, Pagoda has enoughcapacity to handle up to 900,000 requests per year, althoughmanagement doesn't expect the number of requests to changemuch from the current level of 800,000 per year.A firm located in New Delhi, India, has approachedPagoda about outsourcing the online help desk. The offer isattractive. The New Delhi firm's own personnel would handlethe help desk function. These personnel all speak English flu-ently and have college degrees or appropriate technical back-grounds. And because they are located in India, labor costswould be a fraction of what they are in the United States. Thesavings would be passed on, in part, to Pagoda. And since the220 PART III ESTABLISHING SUPPLY CHAIN LINKAGES4. A statement of work typically specifies performancemeasurements that the buying firm can use to determinewhether the service provider is meeting the terms of thehelp desk chat room exists on the Internet, Pagoda's customersshould be unaware of the switch.Pagoda management has put together the following fig-ures, outlining the yearly costs associated with the current sys-tem and the Indian proposal:Current Online Help DeskPersonnel costs:40 full-time-equivalent (FTE) technical experts @ $40,000per year (salary and benefits); 3 supervisors @ $70,000each per year (salary and benefits)Equipment costs:4 servers @ $2,000 per year20 PCs@ $1,000 per yearVariable costs:$1.50 per request (office supplies, fax paper, etc.)New Delhi ProposalFixed cost:$1,500,000 per contract year (to cover administrative andIT costs)Charge:$0.50 per requestQuestions1. Calculate the total cost of outsourcing the online helpdesk versus staying with the current solution. Whichoption is cheaper?2. What other factors, other than costs, should Pagoda con-sider? How would you weight these factors? Given theabove, how might you use a weighted-point evaluationsystem to evaluate the two options?3. Should Pagoda.com outsource its online help desk? Whyor why not? Be sure to consider Table 7.7 and 7.8 whenframing your answer.contract. What performance measurements would yourecommend be put in place? What should happen if theservice provider fails to meet these requirements?

Accepted Answer

Work performance helps an organization in determining the work performed by an individual toward the…