Document Type

Closed Project

Publication Date

Fall 2003


Timothy Anderson

Course Title

Engineering Economics

Course Number

EMGT 535/635


This project explores the implementation of economic analysis techniques as they pertain to the topic of production outsourcing. Through research and contacts, data is gathered such that evaluations can be made concerning the benefits and drawbacks of using contract companies as a means of meeting consumer demands. This specific case relates to Nestlé’s production of the Nescafe Red Cup coffee line. The proposal of a new packaging line has opened the doors to the possibility of outsourcing as a way to meet budget and save on long term costs. The team has focused efforts to provide the most cost effective method of production while maintaining requirements set by the company. Decisions will be made by the company based on the findings of four types of analyses; present worth, payback period, fixed cost optimization, and sensitivity. The data gathered provides a means of developing the four models and their solutions provide insight into the benefits of each individual method. The present worth analysis displays results such that it is suggested to Nestle to outsource the Jar line to a company called Strongpack and in addition, do some in-house outsourcing of the Doypack line through Strongpack. In comparison, the payback analysis suggests that the most time effective method of recovering the initial investment is to outsource the Jar line to Strong pack and manufacture the Doypack in house by Nestle.


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This project is only available to students, staff, and faculty of Portland State University

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