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5.3 A Framework for the Outsourcing Decision

Course video 19 of 20

Modules 1 through 3 of the course introduced the VCAP framework for operations strategy and outlined the main diagnostic tools. We discussed how operations create value V and the role of capabilities in a competitive environment. In this module, we adopt the resource view and turn our attention to the assets that comprise the operating system of the firm. We start with the capacity sizing and investment decision in this chapter. After discussing the key trade-offs and challenges in a capacity strategy, we study how uncertainty impacts capacity valuation. Maximizing this value suggests guidelines on how we can tailor an operation's capacity sizing decision.

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