Table of Contents
- 1 What is a make-or-buy decision?
- 2 What are the three pillars of make-or-buy decision?
- 3 When make-or-buy decision should be done?
- 4 Why is make-or-buy decision important?
- 5 How do you evaluate make-or-buy decisions?
- 6 How is a complete or accept decision made?
- 7 What do you mean by ” make costs “?
- 8 What should be considered when making an outsourcing decision?
What is a make-or-buy decision?
A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier.
What are the three pillars of make-or-buy decision?
This report explores the dynamics of make-or-buy decisions and presents a framework to help companies make the right decisions. The framework is built on three key pillars — business strategy, risks, and economic factors.
What rule does the make-or-buy decision follow?
The make or buy decision involves whether to manufacture a product in-house or to purchase it from a third party. The outcome of this analysis should be a decision that maximizes the long-term financial outcome for a company.
When make-or-buy decision should be done?
Make-or-buy decisions usually arise when a firm that has developed a product or part—or significantly modified a product or part—is having trouble with current suppliers, or has diminishing capacity or changing demand. Make-or-buy analysis is conducted at the strategic and operational level.
Why is make-or-buy decision important?
Companies use the total transaction costs accrued in developing products to reach a make-or-buy decision. Make-or-buy decisions reward firms with a competitive advantage and reduce the cost of production and capital investment.
What is make buy decision explain with examples?
Examples of the qualitative factors in make-or-buy decision are: control over quality of the component, reliability of suppliers, impact of the decision on suppliers and customers, etc. The quantitative factors are actually the incremental costs resulting from making or buying the component.
How do you evaluate make-or-buy decisions?
Factors Influencing Make or Buy Decision:
- Volume of Production:
- Cost Analysis:
- Utilization of Production Capacity:
- Integration of Production System:
- Availability of Manpower:
- Secrecy or Protection of Patent Right:
- Fixed Cost:
- Availability of competent suppliers or vendors.
How is a complete or accept decision made?
A complete or accept decision can be made using quantitative or qualitative research and most of the time, the results of quantitative analysis (cost-benefit analysis) are enough to decide on whether to make the product in-house or buy (outsource) from outside suppliers. How Does Make or Buy Decision Work?
What are the advantages of making a decision?
Some of the advantages of making or buy decisions are as follows: The finding helps choose the most efficient option to go about in-house production of outsourcing. The decision helps in the strategic maneuver of the business. The decision helps save the cost for many businesses.
What do you mean by ” make costs “?
Make costs can include the additional labor required to produce the items, storage requirements within the facility, storage costs overall, and the proper disposal of any remnants or byproducts from the production process.
What should be considered when making an outsourcing decision?
While cost remains the hallmark of any business decision, other factors such as strategic, technological, core competency, risks, and relationships, also constitute outsourcing decisions, not to mention factors involved in developing and introducing a new product.