As discussed in a January 30, 2006, Business Week article, "The Future of Outsourcing," authors Pete Engardio, Michael Arndt, and Dean Foust note that globalization has created an upheaval in the direct labor standard-setting process. The article identifies the impact of outsourcing on both labor rates and efficiency. For example, by outsourcing back-office jobs to Mexico and India, Penske Truck Leasing has realized $15 million in direct labor cost savings and significant gains in efficiency and customer service. Other manufacturers and technology companies also are using global talent pools to get products to market sooner and at lower costs. However, there are many who remain cautious about these outsourcing strategies. Critics point out that managers lack experience and knowledge when it comes to managing "virtual" employees that they cannot even see.
Instructions
a. Identify the types of labor variances that were directly affected by outsourcing jobs at Penske. How can managers use these variances to manage "virtual" employees?
b. Discuss the ethical implications of virtual global corporations. In particular, consider how 3 company can manage the ethical climate of an organization when back-office jobs are located in other countries.