Critical Reasoning

Outsourcing is the practice of obtaining from an independent supplier a product or service that a company has previously provided for itself. Vernon, Inc., a small manufacturing company that has in recent years experienced a decline in its profits, plans to boost its profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself.

Which of the following, if true, most strongly supports the prediction that Vernon's plan will achieve its goal?

(A) Among the parts of its business that Vernon does not plan to outsource are some that require standards of accuracy too high for most independent suppliers to provide at lower cost than Vernon can.
(B) Vernon itself acts as an independent supplier of specialized hardware items to certain manufacturers that formerly made those items themselves.
(C) Relatively few manufacturers that start as independent suppliers have been able to expand their business and become direct competitors of the companies they once supplied.
(D) Vernon plans to select the independent suppliers it will use on the basis of submitted bids.
(E) Attending to certain tasks that Vernon performs relatively inefficiently has taken up much of the time and effort of top managers whose time would have been better spent attending to Vernon's core business.

The OA given is Op E, but i find OP D much better. Reasoning:

What's the plan: "to boost the profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself. "

Means, the main thing is, the plan of outsourcing has to be successful.

Op D says that the company select the supplier on the basis of bids...which means but obvious they pick the best bidder offering low prices...and that is helpful for the success in plan.

If u say, that we don't know whether bidders will bid high/less than i present some standard questions where we make such obvious assumptions in strengthening / support questions.

also if u look at Op E,

Attending to certain tasks that Vernon performs relatively inefficiently has taken up much of the time and effort of top managers whose time would have been better spent attending to Vernon's core business

This plan no where suggests that the outsourcing thing goona be successful.

In sum, i think Op D is more close and more supportive. please share your views on this.

Well the issue here is making profit by saving cost by outsourcing to independent suppliers. On what basis these suppliers are used is really not as important. As one of the constraint is outsourcing is to be done at a cost lower than that the company can do it on its own. So profit is bound to be there and it meets minimum requirment.
THis issue is further strengthen in E by saying that top managers will be able to concentrate even more on their core jobs.
D looses on sole ground that method of choosing the bidder is not important and at least not the must for profit as criterion for selection is already set.

[quote="atulmangal (D) Vernon plans to select the independent suppliers it will use on the basis of submitted bids.
(E) Attending to certain tasks that Vernon performs relatively inefficiently has taken up much of the time and effort of top managers whose time would have been better spent attending to Vernon's core business.

.[/quote]

You're right in the sense that Vernon will pick lowest of the bid but this lowest bid can still be higher than what Vernon spends currently on getting its job done. There's no specific information given about the bid per say. However, option E talks directly about increasing core business of the company and hence it is a better choice.

I used the same logic in choosing between D and E, hope I made some sense:).

maihuna wrote:Well the issue here is making profit by saving cost by outsourcing to independent suppliers.

As u mentioned above, this is what our goal right...can u please suggest, how Op E is supporting / addressing this goal???

Op E: Attending to certain tasks that Vernon performs relatively inefficiently has taken up much of the time and effort of top managers whose time would have been better spent attending to Vernon's core business.

Seems to me is like no one is taking care of outsourcing here, and the only emphasis is on core business. How Op E is influencing this idea "making profit by saving cost by outsourcing to independent suppliers."

atulmangal wrote:Vernon, Inc., a small manufacturing company that has in recent years experienced a decline in its profits, plans to boost its profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself.

Which of the following, if true, most strongly supports the prediction that Vernon's plan will achieve its goal?

What's the plan: "to boost the profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself. "

The main plan is to boost its profits. Plan achieves its goal if profits are increased.
Information about the bid is not mentioned but in E, the inefficiency will be reduced and also time would be spent on core business which can increase profits.

prakhag wrote:You're right in the sense that Vernon will pick lowest of the bid but this lowest bid can still be higher than what Vernon spends currently on getting its job done.

From Op D, I made this general assumption that the company will not only pick the lowest bidder plus also the one who produce the goods in lower costs than the company itself. I believe its logical to make this assumption. Earlier i used to think that we can not make such assumptions, but later some questions testing this same concept changed my thought process. I u think its wrong i will find some standard question and present here.

In the worst case E helps 0, remember some profit is their by set constraint itself so It helps strengthen the issue. Though In best case as we know, these things help, this is what we call restructuring. To utilize your top management in your core business.

cans wrote:

atulmangal wrote:Vernon, Inc., a small manufacturing company that has in recent years experienced a decline in its profits, plans to boost its profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself.

Which of the following, if true, most strongly supports the prediction that Vernon's plan will achieve its goal?

What's the plan: "to boost the profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself. "

The main plan is to boost its profits. Plan achieves its goal if profits are increased.
Information about the bid is not mentioned but in E, the inefficiency will be reduced and also time would be spent on core business which can increase profits.

Don't u think the author's plan is specifically based on the part in green (see above)??? so the supporting point should strengthen that part only on which the plan is based???

maihuna wrote:In the worst case E helps 0, remember some profit is their by set constraint itself so It helps strengthen the issue. Though In best case as we know, these things help, this is what we call restructuring. To utilize your top management in your core business.

same question from you which i asked from @cans

a small manufacturing company that has in recent years experienced a decline in its profits, plans to boost its profits by outsourcing those parts of its business that independent suppliers can provide at lower cost than Vernon can itself.

Which of the following, if true, most strongly supports the prediction that Vernon's plan will achieve its goal?

Don't u think the author's plan is specifically based on the part in green (see above)??? so the supporting point should strengthen that part only on which the plan is based???

You know what, I feel that you've been thinking too much. This actually looks pretty straightforward, even to me.

What is Vernon's plan? To boost its profits by outsourcing.

those parts of its business that independent suppliers can provide at lower cost than Vernon can itself
implies that the tasks would be outsourced to suppliers who would perform the tasks at a cheaper rate than Vermont itself.

Now, which option tells us how would outsourcing help the company in achieving its goal of boosting profits?

Op D:
Selecting suppliers on the basis of submitted bids may ensure that the price would be economical.
But that's all it tells us. We already know from the stimulus that outsourcing would be cheaper to the company; selection of suppliers only helps in identifying the best rate.

Op E:

How will outsourcing help?
1. Inefficient tasks can be performed efficiently and at a cheaper rate.
2. Managers can spend time and effort on core business.

Which one gives a better reason to go for outsourcing?

Question is not how does company selects vendor but it is how will it return to profitability. Answer E clearly indicates that since its top managers are freed up, there is a possibility that company will come back on track.

Thanks guys!!!

Help me in reasonign out option C.

If the companies which take up outsourcing do become competitors to the main compnay, they wud eat into their profits and in turn the mail aim of the compnay wud not be fulfilled?

confused here..

the question here is how outsourcing will help the company. not on the competitors to the company. If i am correct option C would best fit for weaken the prediction. As for as here in the scope E is the right option