A Case Study Approach on Manufacturing Alternatives in an Emerging Market - Evaluation from a Cost, Flexibility and Risk Management Perspective

Abstract: Title: A Case Study Approach on Manufacturing Alternatives in an Emerging Market – Evaluation from a Cost, Flexibility and Risk Management Perspective Authors: Marianne Johansson and Robin K Rendahl Supervisors: Charlotta Johnsson, Department of Automatic Control, Faculty of Engineering, Lund University, Sweden Måns Kjellsson, Department of Business & Administration, School of Economics and Management, Lund University, Sweden Project Owners: Are Nakkim, Vice President Business Development, Orkla Brands International Sergey Gaydamaschko, Supply Chain & Technical Director, Orkla Brands Russia Research Issue: The need for flexibility as ways to risk manage plays a big part in both Supply Chain theories and Manufacturing Strategy. The literature reviewed states that increased flexibility equals higher costs and outsourcing to a low-cost country often means lower production costs. But the literature does not state how these factors change when the company already is operating in a low cost country. The following hypothesis was proposed: “Flexibility is positively correlated with manufacturing costs in an emerging market” Purpose: The purpose with the thesis was twofold. First, recommend a cost effective and risk minimising solution to Orkla Brand Russia’s pre-processing issue. Second, test the hypothesis in the settings of the case study at hand. Method: The method used was a deductive approach. After a literature study a hypothesis could be proposed and tested through a case study. Conclusion: The study showed that in Orkla Brand Russia’s case it is more beneficial to produce in house than to outsource. The reasons are that it is both more cost efficient and more flexible to produce in house than to outsource production, thus the hypothesis cannot be validated.