Outsource components that are not the core competence of Harting.

B. Harting uses a localization strategy for the following reasons:

 The total landed cost is cheaper

 Sourcing close to its customers reduces delivery lead times, inventories and risks of
disruption
 Supplier response time is faster

Asset Specificity and uncertainty associated with Harting's decision to outsource , by considering
the Transaction Cost Economics Theory Inter party relationships plays a very important role
when it comes to Harting's outsourcing. Theory correctly predict Harting's decision to outsource.
Harting make sure that they don't outsource what they consider as core competency ,pertaining
to asset specificity and IP rights. When they share technical information with suppliers , they are
worried it might threaten their core competency and so they sign non disclosure agreements.
They have stringent supplier qualification program which is driven by corporate office. They
ensure that agreement is signed with supplier before disclosure of any technical details.External
transaction costs - Bargaining and decision costs , policing and enforcement costs come in to
existence . Transaction cost theory is for bringing an organization structure that brings all costs to
minimum. Theory suggests that each type of transaction brings coordination costs of managing
and controlling. Harting outsourcing decisions is based on their manufacturing locations. Theory
correctly predict Harting's decision to outsource Cost plays a significant role in all business
decisions. Lead time and flexibility is an important aspect of delivery. For Harting , whenever
required materials being brought in required quantity by suppliers help in saving cost on
Inventory.High level quality product at doorstep when required and in required amount reduces
base of costs on storing material, inventory management costs which really doesn't add any
value to customers. So being able to bring the material as and when required , Harting doesn't
need any inventory focus and instead can think about expanding its production capacity.It
reduces how much money Harting is spending on its inventory and if any quality issues ,
suppliers are willing to take back material and provide right one within limited time. Uncertainty
associated with Harting Outsourcing While outsourcing uncertainties occur in various forms , if
suppliers are able to provide material on right time. Supplier agreement needs to be formed
based on the delivery time. Quality issues of the materials, whether will be maintained is
uncertain. If international suppliers are involved then currency fluctuations can affect the
outsourcing. Uncertainty can occur internal as well in delivering and meeting customer
standards. Harting has to do corporate level hedging to deal with uncertainties. As a business,
uncertainties are certain , how well company is ready to face leads to its success.

Risks associated with Harting's Outsourcing Definitely Harting has to take risk management in to
account.If suppliers are not able to provide the material , what should be their secondary source
is a concern. Critical components to supply chain has direct impact on business outcomes.
Readiness of output to be delivered to customer depends on the sourcing availability from
supplier. Harting has to choose partnership with supplier on the basis of awareness of how
readily the product is available with them and how quickly they can deliver and how critical is that
product in end customer output.After all these studies agreements and partnerships are formed
with suppliers. Harting has uncertainty both internally as well as externally.Internal factors such
as transferring know-how, ensuring global standards. External factors related to suppliers
contracts and agreements. Larger uncertainty is while dealing with International suppliers. The
way contracts are enforced in that country is of significant importance. Just by writing contracts ,
things wont go fine , so adequate knowledge of that country laws and knowledge oh=n enforce-
ability is important. Significant value of currency also plays an important role.Currency
fluctuations of Euro and Dollar affects the terms and conditions. Next factor is the political
aspects.It is unclear what changes it can bring in future when government change. Final factor
that can affect international supply is the logistics part.Unions and strikes and its impact in port
can affect the supply and transportation of materials.