3. What is subcontracting strategy>
As a pure strategy, Subcontracting means always
producing at the level of minimum demand and meeting
any additional demand through subcontracting.
Subcontracting can mean buying the extra amounts
demanded or turning away extra demand.
The latter can be done by increasing prices when
demand is high or by extending lead times.85
The major advantage of this strategy is cost.
Costs associated with excess capacity are
avoided, and because production is leveled,
there are no costs associated with changing
production levels.