Well, this lady must answer a few questions, the first of which is, what type of control does she want? Is it control of product quality? Perhaps she is not confident about selling substandard products.

If it is control of the supply process that she wants, it could be that the doors and windows are selling so fast that there is always a wide time gap between delivery and sale, which leaves her exposed to the competition.

Now, although she may want control and perhaps is more passionate about manufacturing than sales, she must do her research evaluation and ask herself these questions: Can she afford the cost of manufacturing herself? Does she have the resources, i.e., expert personnel, capital equipment, location, a source of affordable raw material for manufacturing, financial capital, etc?

While out-sourcing is the simpler of the two options, if she can overcome all the current hurdles, plus score high on all the criteria necessary for success in manufacturing, then PJ can go ahead and satisfy her passion and take back control. God knows we need more manufacturers in this country!

- Email Suzanne Campbell at suecampbell@cwjamaica.com.

My initial thoughts are to continue outsourcing while she develops a sales-distribution and marketing strategy to increase her profitability. Her focus should be on selling more doors and windows.

A good friend and mentor recently summarised the value-chain analysis and, interestingly enough, the manufacturing component had the least returns. He based this on empirical data which indicate that the value chain for a product is as follows:

R&D, patents and copyright accounted for 40-45 per cent.

Manufacturing 10-15 per cent.

Sales distribution marketing 40-50 per cent.

The value-chain analysis is a concept from business management that was first described and popularised by Michael Porter in his 1985 best-seller Competitive Advantage: Creating and Sus-taining Superior Performance.

A value chain is a chain of activities. Products pass through all activities of the chain in order and at each activity, the product gains some value.

The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. A diamond-cutter can be used as an example of the difference. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable than a cut diamond.

((http://en.wikipedia.org/wiki/Value_chain))

I have been reviewing the investment pattern of Warren Buffet and other such global investors who initially take the option of outsourcing until it is economically impractical not to manufacture same for themselves. Then what they do, is buy into the plants to which they were outsourcing to have more control over the quality, consistency and cost structure of the end product.

PJ should start thinking like a global entrepreneur. Another key constraint to this equation is the long-term business climate of Jamaica and the direction of all the indicators.

- Email Edward ChinMook at chinmook@yahoo.com.

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