Discuss the optimal method for procuring inputs that have well-defined and measurable quality specifications and require highly
specialized investments. What are the primary advantages and disadvantages of acquiring inputs through this means? Give an example not used in the textbook that uses this method of procurement.
the optimal method for procuring inputs that have well-defined and measurable quality specifications and require highly specialized investments is <u>Contracting.</u>
Explanation:
Contracting requires writing an agreement that extends the relationship between a buyer and a seller
The key features of contracting includes
specialization
reduced opportunism
avoidance of skimping on specialized investment
expensive in complex environments
The primary advantage of using contracting is specialization and the main disadvantage is high cost.
U.S. Shell Oil Company is the United States which is among the largest oil companies in the world is a good example of a company that uses Contracting method for procuring inputs.
The optimal method for procuring inputs that have well-defined and measurable quality specifications and require highly specialized investments is the contract.
Explanation:
The contract is signed between the seller and the buyer, and establishes formal and legal terms, and agreed responsabilities. The primary advantages are that firms and buyers are allowed to focus in producing and getting what they need as contracts are used for tangible goods and for rendered services, reducing the opportunistic behaviour and underinvestment.
The CONASUPO, mexican government office, signed a contract with the mexican ranch owners to get all their milk production at low prices to feed the thousands of low income families.
Job rotation is when an employee is moved from one job role to another with the intent of making the employee familiar with all the units in the organisation.
