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Bain Hard Sourcing/Outsourcing

Midwest Machinery Co.

#Manufacturing

Practice this advanced sourcing/outsourcing case interview question from Bain in the Manufacturing sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This is a complex sourcing case requiring candidates to balance quantitative financial analysis with qualitative factors including community relations, employee concerns, and operational risks. The case tests both mathematical structuring skills (calculating per-unit costs and breakeven analyses) and strategic thinking, as the recommendation must synthesize numerical findings with the CEO's priorities and broader organizational context.

Estimated Time 37 minutes
Difficulty Hard
Source Chicago Booth
50 / 100
The MM team has proposed moving the manufacturing process for the XL292 machine, a critical machine for many of their end products, to India. These results may affect the CEO’s decision on whether to outsource other processes, as there is a total of $300M in costs with outsourcing potential. Before the CEO looks at the financial data, they want to have a clear understanding of the pros and cons of outsourcing. Develop a structure for thinking through the pros and cons of outsourcing this process to India. Explain the model and what you would advise the CEO to consider as they review the data.

Clarifying Information

  1. Community – The company is located in a small town in the U.S. and has been the largest employer there for over 30 years.
  2. Unions – Midwest is unionized but the union and management have typically been on friendly terms.
  3. CEO Personal Incentive – If they save the company over $50M this year, they will receive a $1M bonus.
  4. Competitors – They have been benefiting from lower costs associated with outsourcing for years.
Mock Interview
Interviewer

The MM team has proposed moving the manufacturing process for the XL292 machine, a critical machine for many of their end products, to India. These results may affect the CEO's decision on whether to outsource other processes, as there is a total of $300M in costs with outsourcing potential. Before the CEO looks at the financial data, they want to have a clear understanding of the pros and cons of outsourcing. Develop a structure for thinking through the pros and cons of outsourcing this process to India. Explain the model and what you would advise the CEO to consider as they review the data.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

Midwest Machinery, a $3B industrial goods manufacturer, is considering outsourcing XL292 machine production to India to reduce costs. The candidate must develop a pros/cons framework, perform cost analysis ($540/unit domestic vs. $460/unit India = $0.8M savings per machine, or ~$45M across all outsourcing opportunities), and provide a recommendation that balances profit generation with stakeholder concerns.

Key Insights:

  1. Quantitative analysis alone ($80/unit savings, 14.8% reduction) must be validated against qualitative risks (currency fluctuation, quality control, supply disruption, employee/community backlash)
  2. CEO’s financial incentive ($1M bonus for $50M+ savings) creates potential bias; candidate should acknowledge this contextual factor in their recommendation
  3. Pilot approach recommended before full $300M outsourcing to manage risk and test assumptions in a foreign operating environment
  4. Sensitivity analysis important: doubling Indian labor costs reduces savings to $12M (~4%), demonstrating vulnerability to assumption changes
  5. Candidate must weigh aggregate $45M opportunity against individual machine profitability to justify the decision

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