OpMan Inc. offers executive training courses on a number of operations management topics. It is presently bidding on a three-year contract for a training course on supply chain management. Training will be provided bimonthly (i.e., twice each month) for the duration of the contract. Currently, OpMan does not have internal expertise in this area. In order to provide the training, should it win the contract, OpMan is considering (1) hiring a full-time person to do the training or (2) contracting out to an independent consultant. A full-time person will cost OpMan $80,000 for the first year, with a 10% annual adjustment for inflation and salary increases. An outside consultant, on the other hand, will charge $5,000 for a one-time preparation fee and $2,000 each time the training is given.
1. Based solely on cost argument, which option should OpMan choose? Please show your work.
2. What non-cost factors should be considered? Identify at least two such factors.