Ericssons, Outsourcing, Cost, Flextronics
Cost savings negligible for Ericsson's production outsourcing
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Ericsson ABs strategy of outsourcing its production to Flextronics International Limited and others is costing the company more money than an own production would, reported Svenska Dagbladet, citing a study conducted at the universities of Linkoeping and Gaevle.
In the mid-90's, when Ericsson began outsourcing its production, savings were estimated at around 20 bln skr. According to the study, however, it is "highly doubtful" that Ericsson has made any savings at all by outsourcing the production of its radio base stations, for instance.Even long-term possibilities for savings seem slim, while at the same time, important knowhow is streaming out of the company.
The study compares Ericsson's strategy to that of Nokia Corp, which has chosen to produce the most important products itself and only outsource the less important ones. According to Nokia, no other company has been able to match its efficiency in producing the products, the paper reported.
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